If the WACC Is Used in Valuing a LBO

question 48

Multiple Choice

If the WACC is used in valuing a LBO:

• A) the WACC remains constant because of the final target debt ratio desired.
• B) the flotation costs must be added to the total UCF.
• C) the WACC must be recalculated as the debt is repaid and the cost of capital increases.
• D) the tax shields of debt are not available because the corporation is no longer publicly traded.

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Definitions:

Formal Reward Systems

Structured mechanisms within organizations designed to recognize and reward employees’ performance and contributions.

Role Negotiation

The process of discussing and adjusting the responsibilities and expectations of a specific role between individuals or groups.

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Activities or exercises aimed at improving interpersonal relations and social dynamics within a team.

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