If a Company Fails to Accurately Predict It's Cost of Equity

question 66

Multiple Choice

If a company fails to accurately predict it's cost of equity, then:

• A) the firm's WACC will also be inaccurate.
• B) the firm may not be using the proper interest rate to estimate NPV.
• C) the firm may incorrectly accept or reject projects based on decisions made using the cost of capital computed with an incorrect cost of equity.
• D) All of the above are true.

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Definitions:

East Germany

Officially the German Democratic Republic (GDR), a state that existed from 1949 to 1990 in the eastern part of Germany, established after World War II and during the Cold War.

CIA

The Central Intelligence Agency, a civilian foreign intelligence service of the federal government of the United States, tasked with gathering, processing, and analyzing national security information.

Chemical Weapons

Weapons that utilize toxic chemicals to inflict harm or death upon enemy forces or civilians, banned under various international laws and treaties due to their brutal nature.

Biological Weapons

Weapons that use bacteria, viruses, or other pathogens as a means of warfare, intended to cause disease or death in humans, animals, or plants.