A Firm Uses Its Weighted Average Cost of Capital to Evaluate

question 40

Multiple Choice

A firm uses its weighted average cost of capital to evaluate the proposed projects for all of its varying divisions.By doing so,the firm:

• A)automatically maximises the total value created for its shareholders
• B)allocates capital funds evenly amongst its divisions
• C)encourages the division managers to only recommend their most conservative projects
• D)maintains the current risk level and capital structure of the firm
• E)automatically gives preferential treatment in the allocation of funds to its riskiest division

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Definitions:

Lifespan

The maximum duration of life of a species, or the period during which an individual's physical and cognitive functions develop, mature, and decline.

Correlational Study

A research method that explores the relationship between two variables without attempting to establish a cause-and-effect link.

Causation

The action of causing something, referring to a relationship where one thing is understood to be the result of the activity of another.

Reliability And Validity

Terms used in research and evaluation to describe the consistency (reliability) and accuracy (validity) of a measure or test.