When Calculating the WACC,it Is Standard Practice to Subtract ________

question 1

Multiple Choice

When calculating the WACC,it is standard practice to subtract ________ to compute the net debt outstanding.

• A)equity
• B)dividends
• C)cash and risk-free securities
• D)coupons
• E)risk-free interest rate

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Definitions:

Beta

A measure of a security's or portfolio's volatility, or systematic risk, in comparison to the market as a whole.

Risk-free Rate

The risk-free rate is the theoretical return on an investment with zero risk, often represented by the yield on short-term government securities.

CAPM

Capital Asset Pricing Model; a model that describes the relationship between systematic risk and expected return for assets.

Holding Period

The duration of time an investment is held before it is sold, impacting the capital gains tax implications.