WACC Is the Overall Rate of Return a Firm Must

question 291

Multiple Choice

WACC is the overall rate of return a firm must earn on its assets to maintain:

• A) Its current credit rating.
• B) Its current level of cash flows.
• C) The book value of its assets.
• D) The value of its stock.
• E) Its current cost of debt.

---

Definitions:

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.

Price Regulation

Government or regulatory authority control over the pricing of goods and services, often to prevent excessively high prices or monopolies.

Regulatory Agency

A governmental body responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity.

Government

The governing body of a nation, state, or community, responsible for creating and enforcing laws and policies.