An Objective Approach to Calculating Divisional WACCs Would Be Done

question 53

Multiple Choice

An objective approach to calculating divisional WACCs would be done by

• A) simply considering the project's risk relative to the firm's lines of business and adjusting upward or downward to account for subjective opinions of project risk.
• B) computing the average beta for the firm, the firm's CAPM formula, and the firm's WACC.
• C) computing the average beta per division, using these figures for each division in the CAPM formula, and then constructing divisional WACCs.
• D) simply averaging out all the WACCs for all the firm's projects.

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Definitions:

Target Price

A pre-set price determined by a company or government at which a product, especially in agriculture, is aimed to be sold in the market.

Countercyclical Payment

A fiscal mechanism used to reduce the economic fluctuations by providing economic support during downturns and less support during growth periods.

Price Supports

Government interventions to maintain the market price of a commodity or product at a certain level by buying excess supply or instituting price floors.

Government

The organization or system through which a community, state, or nation is governed, often involving regulations and public services.