Which of the Following Best Defines the Term Weighted Average

question 19

Multiple Choice

Which of the following best defines the term weighted average cost of capital (WACC) ?

• A) The weighted average of the costs of debt and equity.
• B) Net income after interest and taxes divided by average common shareholders' equity.
• C) Use of a WACC that is unique to a particular project.
• D) Performance measure based on WACC.
• E) Base case net present value of a project's operating cash flows plus present value of any financing benefits.

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Definitions:

Franchise

A business model that allows individuals or entities to operate a branch of a larger company, using its brand, systems, and support in exchange for fees or royalties.

Entirely New Firm

A start-up or business entity that has been freshly established, having no prior existence.

Two-Income Households

Households in which two adults generate income through employment, contributing to the family's total earnings.

Entrepreneurship

The act of launching, managing, and developing a business venture in order to gain profit by taking on financial risks in the corporate world.