If a Firm Earns the WACC as an Average Return

question 2

Multiple Choice

If a firm earns the WACC as an average return on its average-risk assets, then:

• A)equity holders will be satisfied, but bondholders will not.
• B)bondholders will be satisfied, but equity holders will not.
• C)all investors will earn their minimum required rate of return.
• D)the firm is investing only in positive NPV projects.

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Definitions:

Delayed Reinforcers

Rewards that are not immediately given after a desired behavior, which can affect the strength of the learned behavior over time.

Classical Conditioning

The process of acquiring knowledge by forming connections between stimuli in the environment and those that occur naturally.

Slot Machines

Mechanical or electronic gambling devices that create a game of chance for their users.

Partial Reinforcement

A conditioning schedule in which only a subset of responses is reinforced, leading to more resistant and persistent behavior.