A is corrent. The requirement is to determine the return that would maximize shareholder wealth. The weighted-average cost of capital is equal to 9.2% and taking projects in excess of that percentage would maximize shareholder return. The weighted-average cost of capital is calculated as 9.2% [(7.1% × 60%) + (10.5% × 20%) + (14.2% × 20%)].
B is incorrect. The company must make more than the weighted-average cost of capital.
C is incorrect. The company must make more than the weighted-average cost of capital.
D is incorrect. The company must make more than the weighted-average cost of capital.
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