In General, Firms Should Use Their Weighted Average Cost of Capital

question 4

True/False

In general, firms should use their weighted average cost of capital (WACC) to evaluate capital budgeting projects because most projects are funded with general corporate funds, which come from a variety of sources.However, if the firm plans to use only debt or only equity to fund a particular project, it should use the after-tax cost of that specific type of capital to evaluate that project.

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Definitions:

Demand Curve

A graph representing the quantity of a good that consumers are willing and able to purchase at various prices.

Non-discriminating Monopolist

A monopolist who charges a single price for all units of output sold, unlike price-discriminating monopolists who charge different prices.

Marginal Revenue

It refers to the additional income earned from selling one more unit of a good or service.

Demand Schedule

A table that lists the quantity of a good or service that consumers are willing to buy at various prices.