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The WACC is used to _______ the expected cash flows when the firm has ____________. Select one: a. decrease; short term financing on the balance sheet b. discount; short term financing on the balance sheet c. discount; debt and equity in the capital structure d. increase; debt and equity in the capital structure

Respuesta :

Answer:

c

Explanation:

WACC = weight of equity x cost of equity + weight of debt x cost of debt x (1 - tax rate)

weight of debt = D / (D + E)  

It is used to discount the expected cash flows when the firm has debt and equity in the capital structure. It is suitable because in the calculation of WACC, debt and equity are included

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