11. The weighted average cost of capital

A company that has both debt and equity in its capital structure will use its weighted cost of capital (kaka) as its discount rate.

Based on your understanding of the weighted average cost of capital, complete the following statements:

	The weighted average cost of capital (kaka) is used in the capital budgeting project evaluation process either as the ______ used in the calculation of a projects net present value (NPV) or the ______ against which a projects internal rate of return (IRR) is compared.
	In general, there is _______ relationship between a firms risk level and its weighted average cost of capital.

True or False: Privately held firms tend to rely almost exclusively on the use of market value weights in the calculation of their weighted average cost of capital.

True

False

True or False: The weighted average cost of capital (kaka) represents the minimum return that a firm should earn on new investments exhibiting its average level of risk.

True

False