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A company with high EBIT is considering pursuing multiple projects next year. The trade-off involved will be maximizing the number of projects against a higher credit rating, with an A rating being ideal. Thus the correct answer is D.
The trade-off is referred as a situation when one object gets compromised to gain over another object. This situation comes when decision-making between two goods takes place and one will get selected over the other.
Increasing the number of projects is compromised for a superior credit rating. A strong credit rating won't be enough since more projects will require the business to heavily rely on financing. The A credit rating will be considered.
Therefore, option D is appropriate.
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The complete question is-
A company with high EBIT is considering pursuing multiple projects next year. Which trade-off is involved, and what is the ideal credit rating for the company between AAA, AA, A, and BBB?
Select an answer:
The trade-off is only being able to pursue a few of the projects against a lower credit rating, with an AA rating being ideal.
The trade-off is pursuing more new projects against a lower WACC, with a AAA rating being ideal.
The trade-off is the risk of a credit downgrade against having few new projects, with a BBB rating as ideal.
The trade-off is maximizing the number of projects against a higher credit rating, with an A rating being ideal.