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:

Conformity

The tendency to align one's attitudes, beliefs, and behaviors with those of a group or society.

Line Sizes

Pertains to the dimensions or measurements of length and width in drawings, designs, or any visual representations that require differentiation in thickness for emphasis or clarity.

Discrimination

In psychology, discrimination refers to the ability to perceive and respond differently to distinct stimuli.

Social Categorization

The process by which individuals classify others into groups based on common characteristics.