Why do firms not create securities to finance each project

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Reference no: EM132057036

Question

Because the weighted average given in the equation WACC = (1 - L)r_e + L(1 - T)r_d is always a correct measure of a required return, why do firms not create securities to finance each project and offer them in the capital market in order to accurately determine the required return for the project?

State if each statement is true or false and explain.

The cost would exceed the benefit.

Transaction costs would be excessive.

There would be a significant asymmetric-information problem.

It would be inconsistent with the firm's debt rating.

Note: The correct answer is NOT all are true

Reference no: EM132057036

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