Which of the Following Statements Is FALSE

question 98

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:

Degrees of Freedom

The quantity of independent variables or measures that can change during the computation of a statistic.

T Distribution

A probability distribution used in statistics that arises when estimating the mean of a normally distributed population in situations where the sample size is small and population standard deviation is unknown.

Sample Size

The number of observations or data points that are used in a statistical sample.

Margin of Error

An expression of the amount of random sampling error in a survey's results, which describes the range that the true value lies within with a certain level of confidence.