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jgeorgesyouLv1
20 May
Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)?
Group of answer choices
The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.
A reduction in the risk level of a firm will tend to increase the firm's WACC.
An increase in the market risk premium will tend to decrease a firm's WACC.
The WACC will decrease when the tax rate decreases for all firms that use debt financing.
A 5% increase in a firm's debt-equity ratio will tend to increase the firm's WACC.
Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)?
Group of answer choices
The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.
A reduction in the risk level of a firm will tend to increase the firm's WACC.
An increase in the market risk premium will tend to decrease a firm's WACC.
The WACC will decrease when the tax rate decreases for all firms that use debt financing.
A 5% increase in a firm's debt-equity ratio will tend to increase the firm's WACC.
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Related questions
1. Which of the following statements is correct?
A. The WACC measures the before-tax cost of capital.
B. An increase in the firm's marginal corporate tax rate will decrease the weighted average cost of capital.
C. Flotation costs can decrease the weighted average cost of capital.
D. None of these statements is correct.
2. Which of the following statements is correct?
| A. A decrease in the firm's marginal corporate tax rate will decrease the weighted average cost of capital. | |||||||||
| B. Flotation costs can decrease the weighted average cost of capital. | |||||||||
| C. The cost of debt is based on the cost of all liabilities, including accounts payable and accruals. D. None of these statements are correct. 3. Why do we use market-value weights instead of book-value weights?
|
