Which of the following statements is TRUE about the weighted average cost of capital (WACC)?
A) If a business has a high risk level, the WACC will be higher.
B) If a business has a high risk level, the WACC will be lower.
C) The WACC represents the corporation's internal return targets.
D) The WACC is the same as a business's ROI.

Question

Quizplus · Accepted Answer

The WACC is calculated by taking into account the cost of debt and equity capital and their respective weights in the company's capital structure. If a business has a high risk level, the cost of capital is likely to be higher, resulting in a higher WACC.

Which of the Following Statements Is TRUE About the Weighted