A firm that uses its WACC as a cutoff without considering project risk tends to accept negative NPV projects over time.

Name: A firm that uses its WACC as a cutoff without considering project risk tends to accept negative NPV projects over time.
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Question

Quizplus · Accepted Answer

Using the WACC as a cutoff rate without adjusting for project-specific risk can lead to accepting projects that are riskier than the firm's average project, potentially resulting in accepting projects with negative NPV over time.

A Firm That Uses Its WACC as a Cutoff Without