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, as it adjusts for the expected change in the debt-to-value ratio over time. This means that it reflects how long the current debt level is expected to persist, which is relevant in determining the appropriate WACC for a project. The other options do not accurately describe the meaning of f in this equation.

Consider the Following Equation for the Project WACC with a Fixed