Question

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.

Answer 1

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

Step-by-step 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.