When Using the Weighted Average Cost of Capital (WACC) to Discount

question 36

Multiple Choice

When using the weighted average cost of capital (WACC) to discount cash flows from a project we assume the following:
I. the project's risk are the same as those of firm's other assets and remain so for the life of the project.
II. the project supports the same fraction of debt to value as the firm's overall capital structure that remains constant for the life of the project.
III. the cash flows from the project is always a perpetuity.

• A) I only
• B) II only
• C) I and II only
• D) I, II and III

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Definitions:

Cultural Imperialism

The imposition of one culture's beliefs, practices, and artifacts on another culture through media and consumer products rather than by direct military force.

Economic Strength

The capacity of an economy to produce goods and services, sustain growth, and maintain a strong financial standing.

Material Culture

Refers to the physical objects, resources, and spaces that people use to define their culture. These include buildings, tools, and artwork, representing the tangible or visible aspects of a society.

Technology

The application of scientific knowledge for practical purposes, especially in industry and improvements in tools, machines, techniques, and processes.