Which of the Following Statements Is False

question 25

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:

Relatedness

The feeling or state of being connected or related to others, often considered a fundamental human need.

Autonomy

The capacity to make an informed, uncoerced decision, often relating to personal freedom and self-determination.

Competence

The capacity to perform a task effectively and with skill, typically evaluated against a benchmark.

Financial Gain

The increase in monetary resources or wealth, often as a result of investments, business ventures, or other economic activities.