Which One of the Following Statements Is Accurate for a Levered

question 13

Multiple Choice

Which one of the following statements is accurate for a levered firm?

• A)WACC should be used as the required return for all proposed investments.
• B)A firm's WACC will decrease whenever the firm's tax rate decreases.
• C)An increase in the market risk premium will decrease a firm's WACC.
• D)The subjective approach totally ignores a firm's own WACC.
• E)A reduction in the risk level of a firm will tend to decrease the firm's WACC.

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Definitions:

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, across different jobs and industries.

Substitution Effect

The change in quantity demanded of a good due to a change in its price, leading consumers to switch to or from substitute products.

Higher Wage

A wage rate that is above the average or minimum level commonly paid for similar work.

Wage Discrimination

Unequal pay for workers who perform similar jobs or duties, often based on gender, race, age, or sexual orientation.