When fiRms Develop a WACC for Individual Projects Based on the Cost

question 157

Multiple Choice

When firms develop a WACC for individual projects based on the cost of capital for other firms in similar lines of business as the project, the firm is utilizing a ____________________.

• A) Subjective risk approach.
• B) Pure play approach.
• C) Divisional cost of capital approach.
• D) Capital adjustment approach.
• E) Security market line approach.

---

Definitions:

Monetary Payments

Transactions involving the transfer of money from one party to another as a form of compensation or settlement.

Assignor

The party in an agreement who transfers their rights or property to another, called the assignee.

Assignee

A person, party, or entity to whom a contract or legal right has been transferred.

Assignor

The party in a contract or agreement who transfers their rights or interests to another party, known as the assignee.