Which of the Following Statements Is FALSE

question 21

Multiple Choice

Which of the following statements is FALSE?

• A)The firm's weighted average cost of capital (WACC)denoted r_wacc is the cost of capital that reflects the risk of the overall business,which is the combined risk of the firm's equity and debt.
• B)Intuitively,the difference between the discounted free cash flow model and the dividend-discount model is that in the divided-discount model the firm's cash and debt are included indirectly through the effect of interest income and expenses on earnings in the dividend-discount model.
• C)We interpret r_wacc as the expected return the firm must pay to investors to compensate them for the risk of holding the firm's debt and equity together.
• D)When using the discounted free cash flow model we should use the firm's equity cost of capital.

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Definitions:

Jointly Owned

Describes property or assets owned together by two or more parties, where each has an undivided interest in the whole.

Estate In Fee Simple

Refers to the most complete ownership of land or property that can be legally held under common law, implying absolute ownership without any limitations or conditions.

Leasehold Estate

The creation of an ownership interest in the tenant. An interest in real estate that is held under a lease. Also called tenancy.

Life Estate

An estate in which the owner owns real property for his or her life or for the life of another.