If a Company Fails to Accurately Predict It's Cost of Equity

question 3

Multiple Choice

If a company fails to accurately predict it's cost of equity, then

• A)the firm's wacc will also be inaccurate.
• B)the firm may not be using the proper interest rate to estimate NPV.
• C)the firm my incorrectly accept or reject projects based on decisions made using the cost of capital computed with an incorrect cost of equity.
• D)All of the above are true.

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Definitions:

Dual Federalism

A political arrangement in which power is divided between the federal and state governments in clearly defined terms, with state governments exercising those powers accorded to them without interference from the federal government.

Block Grants

Financial resources provided by the federal government to state and local governments, with relatively few restrictions on how they can be spent, often for broad purposes like community development or social services.

New Deal

A series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States during the 1930s to help recover from the Great Depression.