If a Firm Earns the WACC as an Average Return

question 115

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:

Frontal Lobe

The area of the brain located in the front part of the head, involved in executive functions such as reasoning, planning, problem-solving, and control of movement and emotions.

Postconventional Morality

The stage of moral development characterized by an individual's reasoning based on personal principles of justice and rights.

Ethical Principles

Fundamental guidelines that influence moral decision making and conduct.

Preconventional Stage

The first level of Kohlberg's stages of moral development, where behavior is driven by the desire to avoid punishment and seek rewards.