The WACC Approach to Valuation Is Not as Useful as the APV

question 53

Multiple Choice

The WACC approach to valuation is not as useful as the APV approach in leveraged buyouts because:

• A) there is greater risk with a LBO.
• B) the capital structure is changing.
• C) there is no tax shield with the WACC.
• D) the value of the levered and unlevered firms are equal.
• E) the unlevered and levered cash flows are separated which cannot be used with the WACC approach.

---

Definitions:

Interpersonal Space

The physical distance maintained between individuals in social interactions, influenced by cultural norms and personal preferences.

Body Posture

The way in which an individual holds their body while standing, sitting, or lying down, which can communicate nonverbal cues or affect physical health.

Communication Channel

The medium through which information is transmitted from one person or entity to another, such as email, telephone, or face-to-face conversations.

Feedback

Information provided about reactions to a product, a person's performance of a task, etc., used as a basis for improvement.