When we use the WACC to assess a project,we assume that the ________ ratio does not change.
A)reward to systematic risk
B)risk to reward
C)debt to equity
D)volatility to systematic risk
E)current

Question

Quizplus · Accepted Answer

The WACC calculation involves the use of the company's capital structure, which is the mix of debt and equity financing. The debt to equity ratio is a key component of the capital structure, and assuming that it does not change allows for consistency in the calculation of the WACC. Changes in the debt to equity ratio can alter the cost of capital and therefore affect the project's viability.

When We Use the WACC to Assess a Project,we Assume