Why Is an Accurate WACC So Important When Evaluating a New

question 4

Multiple Choice

Why is an accurate WACC so important when evaluating a new project? Assume a negative cash outflow at Time 0 and positive project cash flows thereafter.

• A)The coupon rate on new bonds issued to fund the project will be set equal to WACC.
• B)The project's WACC will replace the firm's WACC as the discount rate for all future projects.
• C)The project's accept/reject decision will be based on the NPV calculated using that WACC.
• D)The return to shareholders will be limited by the WACC.
• E)The firm can only maintain or increase its current value if the project WACC exceeds the project's internal rate of return.

---

Definitions:

Calorie Restriction

The practice of reducing calorie intake without malnutrition, often to slow down aging and extend lifespan.

Very Low-Calorie Diet

A diet that severely restricts daily calorie intake to promote rapid weight loss, typically consisting of 800 calories or less per day.

Posttreatment Sessions

Meetings or sessions that occur after the completion of a primary treatment regimen to monitor recovery and prevent relapse.

Low-Calorie Diet

A dietary regimen that restricts calorie intake, typically to promote weight loss or improve health.