Why would a firm not use its weighted average cost of capital (WACC) to evaluate all...

70.2K

Verified Solution

Question

Finance

Why would a firm not use its weighted average cost of capital(WACC) to evaluate all proposed investments? (5m)
Hints and notes to students: dot points are acceptable.It is important to explain your answers with details or demonstrateyour understanding by applying examples. Full marks willnot be awarded to identical (100% similarity)answers from the required textbook.

Answer & Explanation Solved by verified expert

3.8 Ratings (623 Votes)

A firm may not use its WACC to evaluate all of its proposed investments because the WACC is always a representation of the firms required rate of return whereas the proposed investment at times See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Why would a firm not use its weighted average cost of capital(WACC) to evaluate all proposed investments? (5m)Hints and notes to students: dot points are acceptable.It is important to explain your answers with details or demonstrateyour understanding by applying examples. Full marks willnot be awarded to identical (100% similarity)answers from the required textbook.