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Northwest Territories Holding Corporation is comprised of two different divisions: car rental and ...

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Northwest Territories Holding Corporation is comprised of two different divisions: car rental and ...

Northwest Territories Holding Corporation is comprised of two different divisions: car rental and furniture manufacturing. Two-thirds of the company's business comes from the furniture manufacturing division and the balance from the car rental division. The WACC for the car rental division is 9% and for the furniture manufacturing division is 15%. What would happen if the company used the overall WACC in the valuation of the following independent projects?

Project	Industry	CF0	Annual CF	Project Life
I	Car rental	$1 million	$270,000	5 years
II	Furniture manufacturing	$3 million	$765,000	6 years
III	Car rental	$2 million	$510,000	6 years
IV	Furniture manufacturing	$4 million	$1,500,000	4 years

▸ Incorrectly reject project III and incorrectly accept IV.

▸ Incorrectly reject projects I and III.

▸ Incorrectly accept project II and incorrectly reject project I.

▸ Incorrectly accept projects II and IV.

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Corporate Finance

Edition: 5^th

Author: Booth

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nenialinda

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tifftran Author

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I appreciate what you did here, answered it right Smiling Face with Open Mouth

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Correct

terriroberts96

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You make an excellent tutor!

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