Business, 04.05.2021 19:30 kimryan520

Jeff Bezos has just promoted you to Chief Financial Officer of Amazon. You find on your desk plans for Amazona€™s latest project: to corner the paper clip market by buying the worlda€™s largest paper clip manufacturing company. Your financial analysts have determined that this project will be a lot less risky than any of Amazona€™s other current operations, since paper clips will probably continue to be used at the current level well into the foreseeable future. You were not able to find a pure play paper clip company during your analysis. Amazona€™s overall WACC is 10%. Which of the following would be a reasonable course of action to take? a. Take 3 percentage points off the company’s overall WACC, since this project is less risky than Amazon’s overall operations
b. Use 10% as the project’s WACC, since risk does not play a role in WACC
c. Add 3 percentage points to the company’s overall WACC, because lower risk would lead to a higher WACC
d. Use an average of pure-play paper clip companys' WACC's as a proxy for this project’s WACC
e. Both A and D are reasonable courses of action for you to take

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