If a Firm Earns the WACC as an Average Return

question 2

Multiple Choice

If a firm earns the WACC as an average return on its average-risk assets, then:

• A)equity holders will be satisfied, but bondholders will not.
• B)bondholders will be satisfied, but equity holders will not.
• C)all investors will earn their minimum required rate of return.
• D)the firm is investing only in positive NPV projects.

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Definitions:

Transitions

The process or period of changing from one state or condition to another in life, work, or environment.

Single-Parent Household

A household in which one parent is responsible for raising child(ren) without the presence of a spouse or partner.

Family Function

The roles and operations within a family unit, including emotional support, socioeconomic provision, and upbringing of children.