1. The company has two divisions, High Risk Division and Low Risk Division. The company has determined an overall WACC. Which is true?
a) The company should assess all projects using WACC as discount rate
b) High Risk Division typically has better project opportunities
c) Low Risk Division typically has better project opportunities
d) Both divisions should use the same discount rate for proposed projects
e) High Risk Division projects will typically apply a higher discount rate
2. When analyzing a potential project, depreciation costs become important because _______.
depreciation costs themselves are cash flows.
depreciation costs allow firms to allocate a large expenditure over a long period of time.
depreciation cost saves income taxes, which is a relevant cash flow.
depreciation costs increases the project costs over a longer period of time.