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.

Recognize the limitations and context-required nature of accounting metrics.

Comprehend the use of performance measurement systems in assessing company performance according to its goals and objectives.

Identify how managerial accounting information is used for evaluating employee performance and making strategic decisions.

Distinguish between internal and externally imposed benchmarks in assessing performance.

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Definitions:

Financialization

The process by which financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes.

Public Sector Budget

The financial plan for revenue and expenditure allocated to various government departments and public entities.

Private Equity

Investment in companies that are not publicly traded, typically conducted by private equity firms, venture capitalists, or angel investors.

Shareholder-Value Movement

An approach in corporate governance focusing on increasing the returns to shareholders as the primary goal of a company, often influencing its strategic and operational decisions.