If a fiRm Uses Its WACC as the Discount Rate

question 35

True/False

If a firm uses its WACC as the discount rate for all of the projects it undertakes, then the firm will
tend to become riskier over time.

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Definitions:

Free Cash Flow

A financial metric that measures the amount of cash generated by a company after accounting for capital expenditures.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue, indicating financial performance.

Cost of Goods Sold

Expenses directly linked to the creation of a company's sold goods, which include the costs of materials and labor.

Cash Paid

The total amount of cash disbursed by a company during a given period for various purposes, including operating expenses, asset purchases, or debt repayment.