Firms deal with different types of risk in their day-to-day operations and adopt risk management strategies. It is important to understand why firms manage risk. analysis of a risk management strategy should also involve an examination of the consequences of the strategy on the firms weighted average cost of capital (WACC). True or False: For the strategy to increase the firm's share price, it should decrease the firm's expected future free cash flows and/or decrease its WACC. False True Would more stable cash flows help or hinder a firm as it tries to maintain its optimal capital budget? Help a firm maintain its optimal capital budget Hinder a firm from maintaining its optimal capital budget pay more in taxes over the long run? The firm with stable earnings The firm with volatile earnings firm's shareholders, they may benefit other stakeholders of that firm-for example, its managers. False True