With No Debt, the WACC Is the Cost of Equity

question 33

True/False

With no debt, the WACC is the cost of equity plus the required rate of return on the company's underlying assets.

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Definitions:

Construct Validity

The extent to which a test measures what it claims, or is supposed to measure, within theoretical frameworks.

Reverse Causality

A situation where the supposed effect influences the cause, challenging the traditional direction of causation.

Confound

A variable that mistakenly appears to cause the observed effect but in reality is associated with both the supposed cause and effect, thus misleading the interpretation.

Temporal Order

The sequence in which events occur in time.