Question

which of the following is true about the wacc? multiple select question. the wacc will always increase if the level of debt in the capital structure increases. it is also referred to as the discount rate that is used to discount cash flows in capital budgeting problems. it is the expected return a firm must earn on its existing assets to maintain its current value. the

Answer 1

The Weighted Average Cost of Capital (WACC) is a financial measure that is used to assess the cost of a company's capital. It takes into account the mix of debt and equity in the company's capital structure. The WACC is referred to as the discount rate used to discount cash flows in capital budgeting problems.

Step-by-step explanation:

The Weighted Average Cost of Capital (WACC) is a financial measure that is used to assess the cost of a company's capital. It takes into account the mix of debt and equity in the company's capital structure.

The first statement is false. The WACC may or may not increase if the level of debt in the capital structure increases. It depends on the cost of debt and the company's cost of equity.

The second statement is true. The WACC is indeed referred to as the discount rate used to discount cash flows in capital budgeting problems.

The third statement is false. The WACC is not the expected return a firm must earn on its existing assets to maintain its current value. It represents the required rate of return the company needs to generate to satisfy its investors.