The Speedometer in Your Old Car Is Broken

question 12

Multiple Choice

The speedometer in your old car is broken. Sometimes it accurately reports your speed, sometimes it reports a speed that is slower or faster than your actual speed, and sometimes it reports that you are not moving, even when you are. The speedometer lacks

• A) validity
• B) reliability
• C) generalizability
• D) falsifiability

---

Definitions:

WACC

The Weighted Average Cost of Capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets.

WACC

Weighted Average Cost of Capital (WACC) is the average rate that a company is expected to pay to finance its assets, incorporating the cost of equity and debt.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project, calculated by discounting future cash flows to their present value and subtracting the initial investment.

IRR

Internal Rate of Return; a metric used in capital budgeting to estimate the profitability of potential investments.