The WACC Is Used to _______ the Expected Cash Flows

question 37

Multiple Choice

The WACC is used to _______ the expected cash flows when the firm has _______.

• A) discount; debt and equity in the capital structure
• B) discount; short term financing on the balance sheet
• C) increase; debt and equity in the capital structure
• D) decrease; short term financing on the balance sheet
• E) None of these.

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Definitions:

Simple Rate of Return

A financial metric that calculates the gain or loss of an investment over a specific period as a percentage of the investment's initial cost.

Cash Outflows

Payments or expenditures made by a business or individual, resulting in a decrease in cash balance.

Useful Life

The estimated duration of time that an asset is expected to be useful in operations, contributing to the company's income generation.

Required Rate of Return

The minimum rate of return on an investment that is acceptable to an investor or required to cover costs.