Which of the Following Statements Is False

question 81

Multiple Choice

Which of the following statements is false?

• A) If we can identify a comparison firm whose assets have the same risk as the project being evaluated, and if the comparison firm is levered, then we can use its equity cost of capital as the cost of capital for the project.
• B) We can calculate the cost of capital of the firm's assets by computing the weighted average of the firm's equity and debt cost of capital, which we refer to as the firm's weighted average cost of capital (WACC).
• C) The portfolio of a firm's equity and debt replicates the returns we would earn if the firm were unlevered.
• D) When evaluating any potential investment project, we must use a discount rate that is appropriate given the risk of the project's free cash flow.

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Definitions:

Neutral Stimulus

A stimulus that initially produces no specific response other than focusing attention, until it is paired with an unconditioned stimulus.

Classical Conditioning

A learning process in which a neutral stimulus becomes associated with an inherently meaningful event or stimulus, eliciting a conditioned response.

Turned Off

A colloquial term describing a lack of interest or a state of disinclination towards something.

Memory

The faculty by which the mind stores and remembers information, critical to learning and the formation of identity.