Respuesta :
Answer:
The WACC will be 10% for average risk
below when the risk is low
and above 10% when the risk is higher than average
as the cost of capital (required return from the stockholders) will increase pushing the WACC higher
Explanation:
As the WACC is composed by the cost of debt and the cost of equity a higher risk will require a better return for the investor thus, the equity proportion that determinates the WACC will change along the project risk.
The WACC depicts all of the company's activities and hazards. WACC is not always constant because it is influenced by the risk profile, the company's finance strategy, and the risk-free rate.
Each of these variables changes over time, therefore it may differ for each business line. As a result, each project's cost of capital should be determined on an individual basis rather than collectively.
This indicates that the WACC will alter as a result of market volatility and funding choices. For average-risk projects, the WACC will remain at 10%, according to the information presented. The WACC, on the other hand, will rise for high-risk projects while falling for low-risk enterprises.
This is because, in the case of high-risk ventures, shareholders anticipate a higher rate of return to compensate for the higher risk they are taking with their cash. Depending on the risk profile, the WACC will vary from project to project.
To know more about WACC, refer to the link:
https://brainly.com/question/13981509
