The WACC Is Used in Evaluating Newly Proposed Capital Budgeting

Multiple Choice

The WACC is used in evaluating newly proposed capital budgeting projects. It should therefore be calculated using capital component costs and a capital structure:

A) based on the capital on the firm's books because that's the capital it already has and will use to support new projects.
B) based on conditions the firm will encounter when raising new capital in the next year because that's the capital it will use to support new projects.
C) based on existing capital on the books because both old and new projects have to be supported.
D) based on existing equity but new debt amounts and costs.