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:

Earliest Units

The first units produced or acquired in a period, which are often accounted for differently in inventory costing methods.

Cost Of Goods Sold

The total cost directly associated with producing goods sold by a business, including materials and labor.

Perpetual Inventory System

An inventory system under which the company keeps detailed records of the cost of each inventory purchase and sale, and the records continuously show the inventory that should be on hand.

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold, thus expenses are based on the oldest costs.