Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter25: Portfolio Theory And Asset Pricing Models
Section: Chapter Questions
Problem 8MC: You have been hired at the investment firm of Bowers & Noon. One of its clients doesn’t understand...
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![Which of the following best explains the limitations of using WACC as a
discount rate for evaluating projects?
Od. WACC and beta must be in equilibrium
O WACC is only true when using debt and equity for capital
It is difficult to find the needed information to determine WACC
O The firm itself is a portfolio of projects with varying degrees of systematic risk](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd274a26-846d-4ddf-bd68-03af38aac4ab%2F0ef89d0c-7f0b-4839-8735-e3c2bd513dbd%2Fzeps6zxr8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Which of the following best explains the limitations of using WACC as a
discount rate for evaluating projects?
Od. WACC and beta must be in equilibrium
O WACC is only true when using debt and equity for capital
It is difficult to find the needed information to determine WACC
O The firm itself is a portfolio of projects with varying degrees of systematic risk
![Which of the following disadvantages of the "payback period" is addressed by
using the "discounted payback period" method?
O Bias against long-term projects such as research and development
O Consideration of cash flows past the payback period
O Accounting for time value of money
O Arbitrary cutoff point](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd274a26-846d-4ddf-bd68-03af38aac4ab%2F0ef89d0c-7f0b-4839-8735-e3c2bd513dbd%2Fqwqatsa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Which of the following disadvantages of the "payback period" is addressed by
using the "discounted payback period" method?
O Bias against long-term projects such as research and development
O Consideration of cash flows past the payback period
O Accounting for time value of money
O Arbitrary cutoff point
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