Question
Under normal circumstances, the weighted average cost of capital is used as the firm's required rate of return because: A. as long as the firm's
Under normal circumstances, the weighted average cost of capital is used as the firm's required rate of return because:
A. | as long as the firm's investments earn returns greater than the cost of capital, the value of the firm will not decrease. | |
B. | returns below the cost of capital will cover all the fixed costs associated with the capital and provide excess returns to the firm's stockholders. | |
C. | it is comparable to the average of all the interest rates on debt that currently prevail in the financial markets. | |
D. | it is an indication of the return the firm is expecting to earn in future from all of its expansion plans. |
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