📊 International Financial Management
Q. Which one of the following is a correct statement regarding a firm's weighted average cost of capital (WACC)?
  • (A) An increase in the market risk premium will tend to decrease a firm's WACC.
  • (B) A reduction in the risk level of a firm will tend to increase the firm's WACC.
  • (C) A 5 percent increase in a firm's debt-equity ratio will tend to increase the firm's WACC.
  • (D) The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.
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✅ Correct Answer: (D) The WACC can be used as the required return for all new projects with similar risk to that of the existing firm.

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