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.

---

Definitions:

Chapter 11 Restructuring

A type of bankruptcy process in the United States allowing a business to reorganize its debts and try to become profitable again.

Currency Contracts

Agreements to exchange a specified amount of different currencies at a specified rate on a predetermined future date.

Event-Driven

An investment strategy that seeks to profit from companies undergoing significant events, such as mergers, restructuring, or bankruptcy.

Hedge Fund

A private investment partnership that uses complex strategies and investments to generate high returns for its investors.