Which Statement Is FALSE Regarding WACC and Its Components

question 19

Multiple Choice

Which statement is FALSE regarding WACC and its components?

• A) The cost of debt is usually less than the cost of equity.
• B) The WACC should be used as the discount rate for all projects that the firm considers.
• C) For an all-equity firm,the cost of equity equals the WACC.
• D) The WACC may increase if the firm seeks external financing for a project.

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Definitions:

Costs

The monetary value required to obtain materials, produce goods, or provide services, impacting the financial performance of a business.

Beliefs

Convictions or acceptances that something exists or is true, especially without proof.

Inventory System

A method or process used by a business to track the quantity, status, and location of items within its inventory from acquisition to sale or usage.

Monitoring

Monitoring refers to the regular observation and recording of activities taking place in a project or system over time, often for the purpose of ensuring compliance with standards or the progress towards objectives.