Which of the Following Is a Limitation to the Weighted

Multiple Choice

Which of the following is a limitation to the Weighted Average Cost of Capital approach?

A) Later projects may be rejected as not meeting the hurdle rate because cheaper funding was used up on an earlier project.
B) Capital structures and interest rates are highly dynamic, always creating inconsistency in determining an overall cost of capital.
C) The approach assumes that there will be more than one form of capital in the structure thereby being inapplicable to companies funded solely by common shares.
D) Different investment decisions have different levels of risk and this is not taken into account in the model.
E) An insufficient number of companies use this method of evaluating their capital structure to trust in its reliability.