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:

Group

A collection of at least two people who are doing or being something together.

Prisoner's Dilemma

A scenario in game theory where two individuals act in their own interest but could achieve a better outcome through cooperation.

Social Psychologists

Scientists who study how people's thoughts, feelings, and behaviors are influenced by the actual or imagined presence of others.

Cooperate

To work together towards a common goal or objective, often requiring compromise and teamwork.