Problem:
The capital budgeting manager of Conscientious Construction Company (CCC) submitted the following report to the CFO:
Project IRR Risk
A 9.0% Low
B 10.0% Average
C 12.0% High
Conscientious Construction Company generally takes risk into consideration by adjusting its average required rate of return (r), which equals 8 percent, when evaluating projects with risks that are either substantially lower or substantially higher than average. A 5 percent adjustment is made for high-risk projects, and a 2 percent adjustment is made for low-risk projects. If the above projects are independent, which project should Conscientious Construction Company purchase?