Which of the Following Statements Is FALSE

question 47

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.
• 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:

Situational Factors

External influences that can affect an individual's behavior and decisions in a given context.

Dispositional Factors

Internal characteristics or attributes of individuals that influence their behavior and attitudes.

Self-serving Bias

A cognitive bias that leads individuals to attribute their successes to internal factors and their failures to external factors.

Positive Self-image

An individual's perception of themselves in a favorable or uplifting manner, contributing to confidence and self-esteem.