Which of the Following Statements Is FALSE

question 12

Multiple Choice

Which of the following statements is FALSE?

• A)The WACC can be used throughout the firm as the company wide cost of capital for new investments that are of comparable risk to the rest of the firm and that will not alter the firm's debt-equity ratio.
• B)A disadvantage of the WACC method is that you need to know how the firm's leverage policy is implemented to make the capital budgeting decision.
• C)The intuition for the WACC method is that the firm's weighted average cost of capital represents the average return the firm must pay to its investors (both debt and equity holders)on an after-tax basis.
• D)To be profitable,a project should generate an expected return of at least the firm's weighted average cost of capital.

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Definitions:

Accounts Payable

Money owed by a company to its creditors for products or services that have been delivered or used but not yet paid for.

NAICS

The North American Industry Classification System, which is used to categorize businesses and industries for statistical purposes in the United States, Canada, and Mexico.

Governmental ID System

Systems implemented by governments to issue identification to its citizens, often used for verification purposes and accessing government services.

NASDAQ 100

An index comprising 100 of the largest non-financial companies listed on the NASDAQ stock market, based on market capitalization.