A firm that uses its WACC as a cutoff without considering project risk will likely see its WACC rise over time.

Name: A firm that uses its WACC as a cutoff without considering project risk will likely see its WACC rise over time.
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Question

Quizplus · Accepted Answer

Using WACC as a cutoff rate without adjusting for project-specific risk can lead to accepting riskier projects, which in turn can increase the firm's overall risk and thus its cost of capital (WACC) over time.

A Firm That Uses Its WACC as a Cutoff Without