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

Question Of The Week - Corporate Finance (4) - CFA Level 1

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- AdaptPrep
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  06 Jun 2018 at 8:14 am
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  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?
  - The project’s systematic risk should be at the company average.
  - The company’s target capital structure will remain constant over time.
  - The company does not pay dividends.
- AdaptPrep
  Participant
  - Undecided
  09 Jun 2018 at 7:40 pm
  Up
  4
  ::
  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.
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