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

question 8

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 my 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:

Positive Correlation

A relationship between two variables in which both variables move in the same direction, indicating that as one variable increases, the other also increases, and vice versa.

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors; it is what causes individuals to act or behave in a certain way to fulfill their needs or desires.

Test Scores

Quantitative measures obtained from educational or psychological tests that reflect the test-taker's performance.

Dependent Variable

In scientific research, the variable that is being tested and measured, which is expected to change under the influence of the independent variable.