Under Normal Circumstances, the Weighted Average Cost of Capital Is

question 43

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 the capital and provide excess returns to the firm's stockholders.
• 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 expecting to earn in future from all of its expansion plans.
• E) the weighted average cost of capital remains unchanged if the components costs of capital changes.

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Definitions:

Sexuality

The capacity for sexual feelings, activities, and identification, including sexual orientation, preferences, and behavior.

Variables

Factors or conditions that can change and potentially affect the outcome of scientific experiments or research studies.

Correlation

A statistical measure that describes the size and direction of a relationship between two or more variables.

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A fixed value that does not change in mathematical equations or scientific experiments, providing stability to formulas and analyses.