Suppose That an Analyst Incorrectly Calculates WACCs Using Book Values

question 41

True/False

Suppose that an analyst incorrectly calculates WACCs using book values of debt and equity instead of market values. The resulting WACC estimates will generally be too high.

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Definitions:

Sublimation

A defense mechanism in which socially unacceptable impulses or idealizations are unconsciously transformed into socially acceptable actions or behavior.

Aggressive Nature

A predisposition or behavior characterized by readiness to confront or attack.

Psychosexual Stages

A Freudian theory that proposes child development progresses through a series of stages oriented around the erogenous zones.

Personality Development

The growth and development of the organized pattern of behaviors and attitudes that makes a person distinctive over their lifetime.