If a ﬁrm uses its WACC as the discount rate for all of the projects it undertakes, then the ﬁrm will
tend to favor low risk projects over high risk projects.

Name: If a ﬁrm uses its WACC as the discount rate for all of the projects it undertakes, then the ﬁrm will tend to favor low risk projects over high risk projects.
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Question

Quizplus · Accepted Answer

Using WACC as a discount rate for all projects does not inherently favor low-risk projects; it may lead to misvaluation by not adjusting for the specific risk of each project.

If a ﬁRm Uses Its WACC as the Discount Rate