True or false Use of the WACC formula assumes a. A project supports a fixed amount of

Question:

True or false

Use of the WACC formula assumes

a. A project supports a fixed amount of debt over the project’s economic life.

b. The ratio of the debt supported by a project to project value is constant over the project’s economic life.

c. The firm rebalances debt each period, keeping the debt-to-value ratio constant.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Principles of Corporate Finance

ISBN: 978-0077404895

10th Edition

Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen

See More Books

Question Posted: Dec 31, 2012 09:45 AM

See More Questions

The WACC formula assumes that debt is rebalanced to maintain a constant debt ratio D/V. Rebalancing ties the level of future interest tax shields to the future value of the company. This makes the...
A simply supported beam AB supports a trapezoidally distributed load (see figure). The intensity of the load varies linearly from 50 kN/m at support A to 25 kN/m at support B. Calculate the shear...
The WACC formula seems to imply that debt is "cheaper" than equity-that is, that a firm with more debt could use a lower discount rate. Does this make sense? Explain briefly.
Analyze the residuals from the regression model on the patient satisfaction data from Exercise 4.49. Comment on the adequacy of the regression model. MTB> Stat> Regression > Regression Normal...
Maximum likelihood estimates possess the property of functional invariance, which means that if is the MLE of , and h() is any function of , then h() is the MLE of h(). a. Let X Bin(n, p) where n...
Britton Metals Inc. has two production departments with the following characteristics: Some of the company's products are produced exclusively in department A and others require activity only in...
Identify the important legal provisions governing information security and privacy in your country.
You have a choice of borrowing money from a finance company at 24 percent compounded monthly or borrowing money from a bank at 26 percent compounded annually. Which alternative is the most attractive?
Dana Incorporated has ten employees who work Monday - Friday each week and they are paid every other Friday. Each employee is paid 800 a week for a 40 hour work week. All ten employees worked 3 days...
Suppose that a learning algorithm is trying to find a consistent hypothesis when the classifications of examples are actually random. There are u Boolean attributes, and examples are drawn uniformly...
Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 15% (D/V = .15). The interest rate has dropped to 8.6%. Recalculate Federateds...
What is meant by the flow-to-equity valuation method? What discount rate is used in this method? What assumptions are necessary for this method to give an accurate valuation?
In a small group, present a plan for a new retail store. Who is the stores target market? Describe the merchandise, atmospherics, price points, services provided, location, and how you would promote...
Anne Berkowitch, co-founder and former chief executive of SelectMinds, discussed how her approach to hiring new employees has evolved: I started out recruiting for skills that I knew I didnt have and...
Vineet Nayar, former CEO of HCL Technologies, commented about the use of new communication channels. He specifically mentioned the use of social networking and the growing importance of Web 2.0...
Briefly describe your own experiences delivering bad news in the following ways: A. Delivering it too late and negatively affecting the bad-news recipient more than you intended. B. Delivering it...
For each of the following communication tasks, identify which communication channel you think would work best: email, blogs, or wikis. Write several sentences explaining why you would choose that...
Over the course of one week, keep a journal about token appreciation. Focus on situations where people may hold differences of opinion. Think about various ways in which people use yes-but...
The Ehrenfest ball-box model. Consider a fixed number n of balls distributed somehow in two boxes. One at a time, a ball is selected at random from the total of n balls and moved from its box to the...
Find the center of mass of a thin triangular plate bounded by the y-axis and the lines y = x and y = 2 - x if (x, y) = 6x + 3y + 3.
In question 21, if we draw two students at random without replacement, what is the probability of our getting a student who owns both and a student who owns neither? Question 21 A survey of 200...
Which of the following features would increase the value of a corporate bond? Which would reduce its value? a. The borrower has the option to repay the loan before maturity. b. The bond is...
The shareholders of the Pickwick Paper Company need to elect five directors. There are 200,000 shares outstanding. How many shares do you need to own to ensure that you can elect at least one...
Can you think of any new kinds of security that might appeal to investors? Why do you think they have not been issued?
What strategies might you use to implement the personal change needed to support organizational change? What is the relevance of unity consciousness in organizational leadership, communications, and...
Recognizing the literature (and its limitations) for conveying policing organization, management, and change - what management/organizational changes are needed in policing today? Why? How do we set...
How do organizations effectively navigate the complexities of organizational change, integrating advanced change management methodologies to mitigate resistance and foster sustainable transformation?

True or false Use of the WACC formula assumes a. A project supports a fixed amount of

Question:

Step by Step Answer:

a A project supports a fixed amount of debt over the pro...View the full answer

Principles of Corporate Finance

Students also viewed these Corporate Finance questions