If a Firm Uses Its WACC as the Discount Rate

question 80

Multiple Choice

If a firm uses its WACC as the discount rate for all of the projects it undertakes then the firm will tend to:
I.reject some positive net present value projects.
II.accept some negative net present value projects.
III.favor high risk projects over low risk projects.
IV.increase its overall level of risk over time.

• A)I and III only
• B)III and IV only
• C)I, II, and III only
• D)I, II, and IV only
• E)I, II, III, and IV

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Definitions:

Social Loafing

Social Loafing is the phenomenon where individuals exert less effort to achieve a goal when they work in a group than when they work alone.

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms or expectations.

Deindividuation

A psychological state where an individual loses self-awareness and sense of individuality, often leading to disinhibited and impulsive behavior, typically in group settings.

Foot-In-The-Door

A persuasion technique where a small request is made first to gain compliance, followed by a larger request, increasing the likelihood of agreement.