Which of the Following Is NOT a Property Necessary for a Consistent

question 5

Multiple Choice

Which of the following is NOT a property necessary for a consistent estimate of the WACC?

• A)It uses book-value-based weights.
• B)It includes the opportunity cost of all investors.
• C)It includes related costs/benefits such as the interest tax shield.
• D)The duration of the securities used in estimating the WACC equals the duration of the free cash flows.

---

Definitions:

Constant-cost Industry

An industry in which the costs of production, including inputs and labor, do not change as the overall industry output changes.

Resource Prices

The cost associated with acquiring the natural resources needed for production, such as minerals, timber, water, and land.

Output Increased

A situation where the production of goods or services in an economy rises.

Purely Competitive Market

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information, leading to firms being price takers.