Using the WACC to Evaluate All Projects Has the Effect

question 67

True/False

Using the WACC to evaluate all projects has the effect of making low-risk projects look MORE attractive and high-risk projects look LESS attractive.

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Definitions:

Financial Statements

Financial statements are formal records of an entity's financial activities and position, including the balance sheet, income statement, and cash flow statement.

FASB

The Financial Accounting Standards Board, an organization responsible for establishing accounting and financial reporting standards in the United States.

Single-Entry Accounting

An accounting system in which the flow of income and expenses is recorded in a running log, basically like a checkbook.

Income Statement

A financial statement that reports a company's revenues, expenses, and profits over a specific period.