Consider the Following Equation for the Question(s) Below

question 66

Multiple Choice

Consider the following equation for the question(s) below.

-Which of the following statements is TRUE?

• A) Holding cash has the opposite effect of leverage on risk and return.
• B) We use the market value of a firm's net debt when computing its WACC and unlevered beta to measure the cost of capital and market risk of the firm's business assets.
• C) Since the WACC does not change with the use of leverage, the value of a firm's free cash flow evaluated using the WACC does not change, and so the enterprise value of the firm does not depend on its financing choices.
• D) Even if a firm's capital structure is more complex, the WACC is calculated by computing the weighted average cost of only the firm's debt and equity.

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Definitions:

ECG

Electrocardiogram, a test that records the heart’s electrical activity and can be used to diagnose various heart conditions.

QRS Complex

A series of deflections in an electrocardiogram representing the electrical activity associated with the ventricular contraction of the heart.

P Wave

The waveform on an electrocardiogram (ECG) that represents atrial depolarization, preceding the contraction of the atria.

Vigorous Activity ECGs

Electrocardiograms recorded during intense physical activity to monitor the heart's electrical activity and detect potential abnormalities.