Aa Aa E. 1. The weighted average cost of capital The weighted average cost of ca
ID: 2640958 • Letter: A
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Aa Aa E. 1. The weighted average cost of capital The weighted average cost of capital (WACC) is used in the capital budgeting project evaluation process either as the used in the calculation of a project's net present value (NPV) or the against which a project's internal rate of return (IRR) is compared In general, there is relationship between a firm's risk level and its WACC. True or False: A firm's weighted average cost of capital (WACC) reflects the composite cost of its debt, preferred stock, and common equity capital. O True O False True or False: Because most firms tend to raise funds in large umpy amounts, their WACCs should reflect the individual, after-tax cost of the particular source of funds used to finance an investment project. O False O True Attempts: Flash Player WIN 16,0,0,305 Q3 3.32 3 2004-2013 Aplia. All rights reserved Grade it Now Save & Continue 2013 Cengage Learning except as noted. All rights reserved.Explanation / Answer
The weighted average cost of capital is used in the capital budgeting project evaluation process either as the discounting rate used in the calculation of a project's net present value(NPV) or the comparable cost of capital against which a project's internal rate of return(IRR) is compared.
In general, there is direct(positive) relationship between a firm's risk level and its WACC.
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A firm's weighted average cost of capital (WACC) reflects the composite cost of its debt, preferred stock and common equity capital.
True.
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Because most firms tend to raise funds in large, lumpy amounts, their WACCs should reflect the individual, after-tax cost of the particular source of funds used to finance an investment project.
False.
After tax cost of all source of financing cannot be calculated. Only the cost of debt can be tax deductible as the income to debtholders is tax deductible. But payment to owners (shareholders) is non tax deductible, so it will be difficult to estimate such costs.
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