A Firm's WACC Is Applicable to Those Projects That

question 125

Multiple Choice

A firm's WACC is applicable to those projects that:

• A) Are considered within one year of the date of the information used in the WACC computation.
• B) Are similar in risk to the current operations of the firm.
• C) Represent new avenues of business for the firm.
• D) Payback within the required period of time.
• E) Are pure plays in new areas of business.

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Definitions:

Insurance Contract

A legally binding agreement between an insurer and the insured, detailing the terms for the payment of claims under certain conditions.

Securities Act

A law or legislation that regulates the issuance and sale of securities to protect investors against misrepresentation, deceit, and other frauds.

Proxy

A document evidencing the transfer of a shareholder’s voting right to an appointee, either with instructions for voting, or allowing discretion to be exercised by the appointee, at a meeting of shareholders of the corporation.

Transferred Right

Involves transferring a legal right from one party to another, which could include property rights, contractual rights, or other legal entitlements.