Which of the Following Statements Is False

question 67

Multiple Choice

Which of the following statements is false?

• A) Because the WACC incorporates the tax savings from debt, we can compute the levered value of an investment, which is its value including the benefit of interest tax shields given the firm's leverage policy, by discounting its future free cash flow using the WACC.
• B) The WACC incorporates the benefit of the interest tax shield by using the firm's before-tax cost of capital for debt.
• C) When the market risk of the project is similar to the average market risk of the firm's investments, then its cost of capital is equivalent to the cost of capital for a portfolio of all of the firm's securities; that is, the project's cost of capital is equal to the firm's weighted average cost of capital (WACC).
• D) A project's cost of capital depends on its risk.

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Definitions:

Personal Experience

An individual's direct involvement or encounter with an event or activity, influencing their perceptions and actions.

Nonmonetary Transaction

An exchange involving goods or services between parties where no money is exchanged, often based on barter or trade of value.

Monetary

Relating to money, currency, or the financial sector, especially in regards to policy, supply, and management.

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A line of yogurt products designed and marketed by Chobani specifically for children, packaged in easy-to-use squeezable pouches.