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:

Degrees of Freedom

Degrees of Freedom refer to the number of values in a calculation that are free to vary while still estimating certain statistical properties.

Between-Treatments

Pertains to the variations between group means in an experiment and is key to determining whether treatment effects exist.

Degrees of Freedom

The number of independent values or quantities that can be assigned to a statistical distribution.

Between-Treatments

The variation in data that is attributed to the differences in conditions or treatments applied in an experiment.