The use of WACC to select investments is acceptable when the:
A)correlation of all new projects are equal.
B)NPV is positive when discounted by the WACC.
C)risk of the projects are equal to the risk of the firm.
D)firm is well diversified and the unsystematic risk is negligible.
E)None of the above.

Question

Quizplus · Accepted Answer

WACC is appropriate for evaluating projects that have a risk profile similar to that of the overall firm, as it reflects the firm's average cost of capital.

The Use of WACC to Select Investments Is Acceptable When