The weighted average cost of capital (WACC) is used in valuation as:

A The growth rate

B The discount rate for future cash flows in a discounted cash flow (DCF) model

C The dividend rate

D The tax rate

✓ Correct Answer: Option B

WACC serves as the discount rate in DCF analysis, reflecting the blended cost of all capital sources.

💡 Why is B) the correct answer?

The correct answer to the question "The weighted average cost of capital (WACC) is used in valuation as:" is Option B: The discount rate for future cash flows in a discounted cash flow (DCF) model.

The other options — A) The growth rate, C) The dividend rate, D) The tax rate — are incorrect for this CFA Exam Prep question. As explained above: WACC serves as the discount rate in DCF analysis, reflecting the blended cost of all capital sources.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Financial Reporting & Analysis topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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The weighted average cost of capital (WACC) is used in valuation as:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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