When We Use the WACC to Assess a Project, We

question 54

Multiple Choice

When we use the WACC to assess a project, we assume that the ________ ratio does not change.

• A) reward to systematic risk
• B) risk to reward
• C) debt to equity
• D) volatility to systematic risk

Identify and calculate the impact of stock reacquisitions and resale on a company’s balance sheet.

Articulate the process of issuing stock above or below par value and its effect on paid-in capital.

Understand bond pricing and the factors that influence bond sale prices such as market interest rates and bond interest rates.

Comprehend the concepts of bond premium and discount including their amortization.

---

Definitions:

Wilcoxon Rank-Sum Test

A nonparametric statistical test used to compare two independent samples to determine if they come from the same distribution.

Nonparametric Test

A statistical test that does not assume a specific distribution for the variable being analyzed.

Simple Random Samples

A subset of a statistical population in which each member of the subset has an equal probability of being chosen.

Wilcoxon Rank Sum Test

A nonparametric statistical test that compares two independent samples to determine if they come from the same distribution.