If a Typical U

question 86

Multiple Choice

If a typical U.S.company correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years,then the firm will most likely

• A) become riskier over time,but its intrinsic value will be maximized.
• B) become less risky over time,and this will maximize its intrinsic value.
• C) accept too many low-risk projects and too few high-risk projects.
• D) become more risky and also have an increasing WACC.Its intrinsic value will not be maximized.
• E) continue as before,because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital.

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Definitions:

EMDR

A therapeutic approach known as Eye Movement Desensitization and Reprocessing aimed at lessening the discomfort linked to traumatic recollections.

Posttraumatic Stress Disorder

A mental condition triggered by witnessing or experiencing a terrifying event, leading to lasting stress and anxiety.

Effective

The capability of producing a desired result or achieving a specific outcome successfully.

Placebo Effect

The phenomenon in which patients improve because they believe they are receiving treatment, even though they are actually receiving a sham or inert treatment.