Choices for blank 1: discount rate or internal rate of return. Choices for blank 2:...
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Choices for blank 1: discount rate or internal rate of return.
Choices for blank 2: maximum return or hurdle rate.
Choices for blank 3: a direct or an inverse.
1. The weighted average cost of capital A company that has both debt and equity in its capital structure will use its weighted average cost of capital (WACC) as its discount rate. Based on your understanding of the weighted average cost of capital, complete the following statements: 4 The weighted average cost of capital (WACC) is used in the capital budgeting project evaluation process either as the used in the calculation of a project's net present value (NPV) or the against which a project's internal rate of return (IRR) is compared. In general, there is relationship between a firm's risk level and its weighted average cost of capital. True or False: Privately held firms tend to rely almost exclusively on the use of market value weights in the calculation of their weighted average cost of capital. O True O False True or False: Because most firms tend to raise funds in large, lumpy amounts, 'their weighted average cost of capital should consist of the individual, after-tax cost of the particular source of funds used to finance an investment project. True O False
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