solution
solution.
Is each of the following statements true or false? Explain your answers briefly.
a. Using the same risk-adjusted discount rate to discount all future cash flows ignores the fact that the more distant cash flows are often riskier than cash flows occurring sooner.
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Order Paper Nowb. The cost of capital, or WACC, is not the correct discount rate to use for all projects undertaken by a firm.
c. If you can borrow all of the money you need for a project at 6 percent, the cost of capital for this project is 6 percent.
d. The best way to estimate the cost of debt capital for a firm is to divide the interest expense on the income statement by the interestbearing debt on the balance sheet.
e. One reliable estimate of a privately held firm’s equity beta is the average of the equity betas of several publicly held competitors.
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