Which of the Following Statements Is False

question 46

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.
• 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:

Mass Consumption

Refers to the widespread purchase and use of goods and services by a large portion of the population, typically associated with the rise of consumer culture in the 20th century.

Progressive America

A period in the early 20th century characterized by a wide range of political, economic, and social reforms aimed at addressing problems stemming from industrialization, urbanization, and corruption.

Understanding of Freedom

The comprehension or interpretation of the concept of freedom, which can vary widely among individuals, cultures, and societies.

Simon Patten

An American economist known for his theories on wealth, consumer behavior, and the welfare state, influential in the early 20th century.