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.

Comprehend the difference between elastic and inelastic demand.

Identify factors influencing elasticity of demand, including the availability of substitutes.

Understand the concept and significance of income elasticity of demand.

Grasp the concept of cross elasticity of demand and how it relates to substitutes and complements.

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