A Company Has a Market-To-Book Ratio That Is Greater Than

question 180

Multiple Choice

A company has a market-to-book ratio that is greater than 1.0. If this company uses book values to determine its WACC, it will derive a value that is ______ the market based WACC because _______

• A) Equivalent to; the ratio of debt to equity is the same whether book values or market values are used.
• B) Greater than; the ratio of debt to equity will be greater than if the ratio was based on market values.
• C) Greater than; the ratio of debt to equity will be less than if the ratio was based on market values.
• D) Less than; the ratio of debt to equity will be greater than if the ratio was based on market values.
• E) Less than; the ratio of debt to equity will be less than if the ratio was based on market values.

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Definitions:

Traumas

Deeply distressing or disturbing experiences that may have long-lasting negative effects on an individual's mental and emotional health.

Future Traumas

Anticipated or potential traumatic events that could have adverse emotional, psychological, or physical impacts on an individual.

Neurotic Anxiety

A level of anxiety stemming from unconscious conflicts that threaten to surface, often resulting in psychological distress.

Performance Anxiety

A feeling of nervousness or fear about one's ability to perform well in a specific situation, often in relation to public speaking, performing arts, or sports.