The Use of WACC to Select Investments Is Acceptable When

question 11

Multiple Choice

The use of WACC to select investments is acceptable when the:

• A)correlation of all new projects are equal.
• B)NPV is positive when discounted by the WACC.
• C)risk of the projects are equal to the risk of the firm.
• D)firm is well diversified and the unsystematic risk is negligible.
• E)None of the above.

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Definitions:

Accounts Receivable Turnover

A financial metric indicating how many times a company collects its average accounts receivable balance in a period.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal, used to evaluate inventory for accounting purposes.

Aging Report

A report that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding, typically used to identify issues with accounts receivable collection.

Direct Write-off Method

An accounting practice where uncollectible accounts receivable are written off directly against income at the time they are deemed irrecoverable.