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2 years ago
Pilgrim's WACC is 12%. It has one opportunity to invest in a high risk project with an expected rate of return of 25%. It has another opportunity to lease a building to a government agency. The expected rate of return on the lease is 10%.
A) Pilgrim should definitely accept the high risk project and reject the leasing arrangement.
B) Ideally, Pilgrim would discount the cash flows from each project at a rate appropriate to its risk.
C) Pilgrim should definitely accept both projects.
D) Pilgrim should finance the lease with all debt and the high risk project with all equity.
Textbook 
Financial Management: Principles and Applications
Edition: 13th
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