A projects cost of capital depends on its risk

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Reference no: EM131021777

Which of the following statements is FALSE?

A) Because the WACC incorporates the tax savings from debt, we can compute the levered value of an investment, which is its value including the benefit of interest tax shields given the firm's leverage policy, by discounting its future free cash flow using the WACC.

B) The WACC incorporates the benefit of the interest tax shield by using the firm's before-tax cost of capital for debt.

C) When the market risk of the project is similar to the average market risk of the firm's investments, then its cost of capital is equivalent to the cost of capital for a portfolio of all of the firm's securities; that is, the project's cost of capital is equal to the firm's weighted average cost of capital (WACC).

D) A project's cost of capital depends on its risk.

Reference no: EM131021777

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