Which of These Statements Is True Regarding Divisional WACC

question 109

Multiple Choice

Which of these statements is true regarding divisional WACC?

• A) Using a divisional WACC versus a WACC for the firm's current operations will result in quite a few incorrect decisions.
• B) Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present more risk than the firm's average beta.
• C) Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present less risk than the firm's average beta.
• D) Using a firmwide WACC to evaluate new projects would have no impact on projects that present less risk than the firm's average beta.

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Definitions:

Systems Approach

A holistic perspective that considers all components of a system and their interactions to understand or solve complex problems.

Management Theory

A collection of ideas and principles that provide a framework for effective management and organization of businesses and other enterprises.

Unity of Command

A principle in management and military strategy that stipulates each individual should report to only one manager to avoid confusion and conflict.

Henri Fayol

A French engineer and management theorist who is best known for developing a general theory of business administration and establishing the 14 principles of management.