A firm should always use its own WACC to evaluate projects regardless of their level of risk.

Question

Quizplus · Accepted Answer

A firm's WACC represents the required rate of return for a company's overall operations, assuming a certain level of risk. However, the risk profile of each individual project may differ from the company's overall risk profile, and therefore may require a different required rate of return. Thus, a firm should use different discount rates for each individual project to evaluate its profitability.

A Firm Should Always Use Its Own WACC to Evaluate