Consider the following equation for the Project WACC with a fixed debt schedule: R_wacc = r_U - dτ_c[rD + f(r_U - r_D)] The term f in this equations represents: A)the annual adjustment percentage to the amount of debt. B)a measure of the permanence of the debt level. C)the dollar amount of debt outstanding. D)the debt-to-value ratio.

Question

Quizplus · Accepted Answer

The term f represents a measure of the permanence of the debt level, which considers how readily a company can adjust its debt levels in response to changes in the market. It reflects the degree to which the company's current level of debt is sustainable in the long term. Option A is incorrect because there is no mention of any adjustment percentage to the amount of debt in the equation. Option C is incorrect because the term f does not represent the dollar amount of debt outstanding. Option D is incorrect because the debt-to-value ratio is not explicitly mentioned in the equation.

Consider the Following Equation for the Project WACC with a Fixed