Multiple Choice
Which of the following statements is FALSE?
A) Since the WACC does not change with the use of leverage, the value of the firm's free cash flow evaluated using the WACC does not change, and so the enterprise value of the firm does
Not depend on its financing choices.
B) Holding cash has the opposite effect of leverage on risk and return.
C) Even if the firm's capital structure is more complex, the WACC is calculated by computing the weighted average cost of only the firm's debt and equity.
D) We use the market value of the firms' net debt when computing its WACC and unlevered beta to measure the cost of capital and market risk of the firm's business assets.
Correct Answer:
Verified
Correct Answer:
Verified
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