Which of the following statement is false? Question options:
The company cost of capital is the correct discount rate only for investments that have the same risk as the company’s overall business.
The company cost of capital is the cost of debt of the firm.
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You wonât have to worry about the quality and deadlinesOrder Paper Now
One calculates the weighted average cost of capital (WACC), on an after-tax basis, as: WACC = (rDebt) (1 – TC ) (D/V) + (rEquity) (E/V), where: rDebt is the required rate of return on the debt, rEquity is the required rate of return on the equity, TC is the company marginal tax rate, and V (Total Market Value) = D (Market Value of Debt) + E (Market Value of Equity).
Firms with high operating leverage tend to have higher asset betas.