The market value of a firm that invests in projects providing a return equal to its WACC will not change over time.

Question

Quizplus · Accepted Answer

Investing in projects that provide a return equal to the firm's Weighted Average Cost of Capital (WACC) means the firm is earning exactly what is required to maintain its current value, neither creating nor destroying value, thus the market value remains unchanged over time.

The Market Value of a Firm That Invests in Projects