Marston Manufacturing Company has two divisions, L and H. Division L is the company’s low-risk division and would have a weighte
d average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Marston Manufacturing Company accept or reject the project? Reject the project Accept the project On what grounds do you base your accept–reject decision? Division H’s project should be accepted, as its return is greater than the risk-based cost of capital for the division. Division H’s project should be rejected since its return is less than the risk-based cost of capital for the division.
Should Marston Manufacturing Company accept or reject the project?
Marston C Company should reject the project because its expected return is lower than Division H's cost of capital.
Since the divisions' risk is so different, and probably their projects are also very different, the company should use different costs of capital to accept of reject the projects based on each division's cost of capital.
Imagine another situation where Division L is evaluating a project that yields 10%. If they used the company's WACC, then they should reject the project, but if they used the division's cost of capital, then they should accept the project (in this case I would recommend accepting it).
Depending on your state, it can go towards county taxes (e.g. Fire Protection, School Maint. Op.) Or it can go to state for transportation and other funds.
The World Trade Organization (WTO) is the global international organization that deals with trade rules between different nations. The World Bank handles all financial assitance with developing countries around the world. Though they both help different nations, one handles the trade between nations and the other handles financial monetary assets.
The cartel model would still make sense even when OPEC produces less than half of the world’s oil because the prices of oil would still be determined by the OPEC countries.
<u>Explanation:
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No matter whether the supply of oil from the OPEC countries reduces or increases, they would still be in the position to determine the price of oil.
This would be due to the existent oligopoly which is the only one in the world as far as oil is concerned.