If a Firm Uses Its WACC as the Discount Rate

question 80

Multiple Choice

If a firm uses its WACC as the discount rate for all of the projects it undertakes then the firm will tend to:
I.reject some positive net present value projects.
II.accept some negative net present value projects.
III.favor high risk projects over low risk projects.
IV.increase its overall level of risk over time.

• A)I and III only
• B)III and IV only
• C)I, II, and III only
• D)I, II, and IV only
• E)I, II, III, and IV

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Definitions:

Repressed Memories

Memories that have been unconsciously blocked due to the memory being associated with a high level of stress or trauma.

Reaction Formation

A defense mechanism where an individual behaves in a way opposite to their real feelings, often unconsciously.

Unconscious Awareness

A state in which an individual is not fully aware of underlying thoughts, feelings, or desires that influence behavior, rooted in psychoanalytic theory.

Moral Anxiety

A feeling of discomfort or worry caused by conflict between one's actions and moral standards.