Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

CFA Events Calendar

View full calendar

CFA Events Calendar

View full calendar

Recommended Discussions

See how our partners can help you ace your CFA exams.

Question of the Week - Corporate Finance

AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
edited August 2015 in Level 1 Questions
When companies calculate net present value for potential investment opportunities, they typically use the weighted average cost of capital. Which of the following assumptions is least necessary for this calculation to be valid?

Question of the Week - Corporate Finance 26 votes

The project's systematic risk should be at the company average.
23%
ThomasWCFAI_wont_stop_meTipzenecoffey123ibrahimisMamapato1 6 votes
The company's target capital structure will remain constant over time.
15%
gstyleCh.MinistryEmmaBealevisnadi 4 votes
The company does not pay dividends.
61%
hairyfairyLeChiffreAdaptPreprsparksjmsatchwellarhelpaYannickTaji123mikestormmansoor08alex_fioritoTadpole31sridharcwRichie321TheClawPahtsan 16 votes

Comments

  • AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
    The company does not pay dividends.

    Necessary assumptions to use the WACC include:

    • The project's systematic risk should be at the company average.
    • The company's target capital structure will remain constant over time.

    Dividend policy does not directly affect this, as the company's cost of capital is the same regardless of distribution method.

Sign In or Register to comment.