A firm's weighted average cost of capital (WACC) is:
A. set by the board of directors of the firm, because it is the benchmark they use to evaluate members of the senior management team.
B. regulated by the Internal Revenue Service (IRS), because tax-deductible debt is included in the computation.
C. determined by participants in the financial markets, because investors set the minimum return they require (demand) to provide the funds the firm invests in capital budgeting projects.
D. the same as the average internal rate of return (IRR) the firm earns on its assets.
E. the combined net present value (NPV) of all the capital budgeting projects in which the firm invests.
Answer: C
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