If MM's Proposition I Holds, Minimizing the Weighted Average Cost

question 16

Multiple Choice

If MM's Proposition I holds, minimizing the weighted average cost of capital (WACC) is the same as maximizing the

• A)market value of the firm.
• B)book value of the firm.
• C)profits of the firm.
• D)liquidating value of the firm.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present values, often reflecting the risk or the cost of capital associated with an investment.

Expected Growth

The anticipated increase in size, value, or importance, often measured in terms of revenue, profits, or market share for businesses.

Dividend Amount

The total sum of money paid by a corporation to its shareholders, determined by multiplying the dividend per share by the total number of shares a shareholder owns.

Dividend Yield

The ratio of a company's annual dividend payments to its share price, expressed as a percentage, indicating the income investors receive in relation to the price of the stock.