If a Firm Uses Its WACC as the Discount Rate

question 204

True/False

If a firm uses its WACC as the discount rate for all of the projects it undertakes, then the firm will tend to favor low risk projects over high risk projects.

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Definitions:

Political-Legal Environment

The aspect of the external environment of an organization that deals with the legal and political conditions influencing its operations.

Politicization

The process by which an issue, policy, or action becomes influenced by political considerations or becomes a matter of political debate.

Legal Accountability

The obligation to ensure actions or decisions are in compliance with the law and to face legal consequences if they are not.

Systematic Preparedness

An organized and methodical approach to being ready and well-prepared for potential future events or challenges.