The WACC Is Used to _______ the Expected Cash Flows

question 35

Multiple Choice

The WACC is used to _______ the expected cash flows when the firm has ___________.

• A) discount; debt and equity in the capital structure.
• B) capitalize; short term financing on the balance sheet.
• C) increase; debt and equity in the capital structure.
• D) decrease; short term financing on the balance sheet.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving more weight to some numbers than others.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the company's balance sheet.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and equity.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period.