Which of These Statements Is True Regarding Divisional WACC

question 109

Multiple Choice

Which of these statements is true regarding divisional WACC?

• A) Using a divisional WACC versus a WACC for the firm's current operations will result in quite a few incorrect decisions.
• B) Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present more risk than the firm's average beta.
• C) Using a simple firmwide WACC to evaluate new projects would give an unfair advantage to projects that present less risk than the firm's average beta.
• D) Using a firmwide WACC to evaluate new projects would have no impact on projects that present less risk than the firm's average beta.

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Definitions:

Insider Trading Violation

Illegal trading of a public company's stock or other securities by individuals with access to non-public, material information about the company.

Nonpublic Information

Information that is not available to the general public, often insider or confidential information that could influence decisions if released.

Tipped Information

Insider information that has been unofficially disclosed to someone who is not authorized to have it.

Health Care Fraud

Illegal acts involving deceit or misrepresentation to gain unjust financial benefit in the health care system.