The WACC is used to value:
A) projects with any risk.
B) projects with the same risk as the firm's current business.
C) projects with the same risk as the firm's debt.
D) projects with the same risk as the firm's equity.

Question

Quizplus · Accepted Answer

The WACC (weighted average cost of capital) is used to value projects with the same risk as the firm's current business, as it represents the average cost of all the capital invested in the company, including debt and equity. Using WACC to value projects with different risk levels may result in inaccurate valuations. Therefore, it is best suited for projects with the same level of risk as the company's current operations.

The WACC Is Used to Value