Under Normal Circumstances, the Weighted Average Cost of Capital Is

question 84

Multiple Choice

Under normal circumstances, the weighted average cost of capital is used as the firm's required rate of return because

• A) as long as the firm's investments earn returns greater than the cost of capital, the value of the firm will not decrease.
• B) returns below the cost of capital will cover all the fixed costs associated with capital and provide excess returns to the firm's shareholders.
• C) it is comparable to the average of all the interest rates on debt that currently prevail in the financial markets.
• D) it is an indication of the return the firm is earning from all of its assets in combination.

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