Which of the Following Statements Is FALSE

question 31

Multiple Choice

Which of the following statements is FALSE?

• A)A firm's weighted average cost of capital, 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, a 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 a 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 a firm's equity cost of capital.

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Definitions:

Net Weight

The weight of a product without the weight of its packaging, often an important measure in commerce for products sold by weight.

T Procedure

A statistical methodology employing the t-distribution to estimate population parameters, assess hypotheses, or construct confidence intervals, typically used when the sample size is small and population variance is unknown.

Null Hypothesis

A default hypothesis that there is no significant difference or effect, serving as the assumption to be tested in a statistical analysis.

Outlier

An observation in a data set that is significantly distant from other observations, indicating a variance from normal behavior.