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.

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Definitions:

Veins Overstretching

refers to the condition where veins are stretched beyond their normal capacity, often leading to varicose veins.

Artery Wall

The structure surrounding an artery, composed of three layers: the inner endothelium, middle muscular layer, and outer connective tissue, designed to withstand and regulate blood pressure.

External Carotid Artery

A major artery that supplies blood to the face and neck.

Blood Pressure

The pressure of circulating blood on the walls of blood vessels, typically measured to assess the heart's function and overall health.