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14 October, 10:49

A firm's WACC:

A. is the proper discount rate for every project the firm undertakes.

B. is a benchmark discount rate that may be adjusted for the riskiness of each project.

C. is for informational value only and should never be used as a discount rate.

D. is used to value all of the firm's existing projects.

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  1. 14 October, 10:59
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    The correct option is B is a benchmark discount rate that may be adjusted for the riskiness of each project.

    Explanation:

    A firm's WACC:

    The Weighted Average Cost of Capital (WACC). Is the rate at which a company's future cash flows need to be discounted to arrive at a present value for the business. It reflects the perceived riskiness of the cash flows. Succinctly put, if the value of a company equals the present value of its future cash flows, WACC is the rate we use to discount those future cash flows to the present.
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