The "Pure Play" Approach to Estimating a Divisions WACC Involves

question 56

Multiple Choice

The "pure play" approach to estimating a divisions WACC involves

• A) computing the value of the division if it were to be spun off as a separate company.
• B) comparisons to free standing firms with businesses similar to the division.
• C) "deleveraging" the division so that only the cost of equity is considered.
• D) using the company's WACC to estimate the value added by the division.

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Definitions:

Memory Reconstruction

The process of retrieving a memory, during which the original memory can be altered or influenced by new information.

Eyewitness Testimony

The recollections of individuals witnessing a scene may or may not be accurate.

State-dependent Learning

The phenomenon where information learned in a particular state of mind is more easily recalled when in that same state of mind.

Context Attribute

Features or properties of the environment that can influence how information is processed and recalled, affecting learning and memory.