WACC Is the Most Appropriate Discount Rate to Use When

question 70

Multiple Choice

WACC is the most appropriate discount rate to use when applying a ______ valuation model.

• A)FCFF
• B)FCFE
• C)DDM
• D)FCFF or DDM, depending on the debt level of the firm,

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Definitions:

Cost of Merchandise Sold

The total cost incurred by a company to sell its products, including the cost of the goods themselves plus any additional expenses.

Sales Tax

A tax on sales or on the receipts from sales, typically added to the purchase price by the seller.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Selling Expenses

Expenses that are incurred directly in the selling of merchandise.