WACC, or the Weighted Average Cost of Capital, is the appropriate discount rate to be used when the proposed investment is a replica of the firm's existing operating activities.
Weighted Average Cost of Capital can be referred to or considered as the amount incurred by a firm to build its capital in order to ensure a smooth functioning of its operational activities. A capital expenditure cost over WACC being incurred helps in ensuring functionality of other factors of production of the firm. The weightage of such costs is averaged throughout.
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Complete question
what is the appropriate discount rate to use only if the proposed investment is a replica of the firm's existing operating activities?
