Using the WACC to Evaluate All Projects May Lead Managers

question 33

Essay

Using the WACC to evaluate all projects may lead managers into accepting high-risk projects that do not compensate adequately for risk and into rejecting low-risk projects that compensate fully for the level of risk but may not have particularly high rates of return.Describe the situations when using a WACC is not appropriate and how these incorrect decisions may be made.

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Definitions:

Australian Psychologists

Professionals trained in the science of how people think, feel, behave, and learn, practicing within Australia's specific legal and cultural context.

Metatrait

A higher-order personality trait that reflects a fundamental dimension underpinning multiple related traits.

Stability

The consistency or permanence of a certain state, condition, or trait over time.

Agreeableness

A personality trait characterized by attributes such as being kind, sympathetic, cooperative, warm, and considerate.