Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
13th Edition
ISBN: 9781260695991
Author: Richard A Brealey
Publisher: McGraw-Hill Education
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 19, Problem 1PS

WACC True or false? Use of the WACC formula assumes

  1. a. A project supports a fixed amount of debt over the project’s economic life.
  2. b. The ratio of the debt supported by a project to project value is constant over the project’s economic life.
  3. c. The firm rebalances debt each period, keeping the debt-to-value ratio constant.

a)

Expert Solution
Check Mark
Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

Given statement:

Project supports a fixed amount of debt over the economic life of a project.

Reason:

It is not true because only the ratio of debt is constant over the economic life of a project and the amount of debt is need not to fixed.

Hence, the given statement is false.

b)

Expert Solution
Check Mark
Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

Given statement:

The ratio of debt supported by project to project value is fixed over the economic life of a project.

Reason:

It is true that the ratio of debt supported by project to project value is fixed over the economic life of a project.

Hence, the given statement is true.

c)

Expert Solution
Check Mark
Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

Given statement:

The firm will keep the debt to value ratio constant and rebalances its debt each period.

Reasons:

It is true that the firm will keep the debt to value ratio constant and rebalances its debt each period.

Hence, the given statement is true.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What is Exploratory Research Case Study? What is the main purpose of Exploratory Research?
please help with how to solve this thank you.
please help in the steps to solve this
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License