If the WACC is used in valuing a leveraged buyout,the:

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In valuing a leveraged buyout, the debt will change over time as it is repaid, so the cost of capital will also change. Thus, the WACC must be recalculated regularly to ensure accuracy in the valuation. A is incorrect because the WACC may change as debt is repaid. B is incorrect because flotation costs are not relevant to a leveraged buyout. D is incorrect because tax shields of debt are still available in a leveraged buyout situation. E is incorrect because there is a correct answer.

If the WACC Is Used in Valuing a Leveraged Buyout,the