n NISM Certifications
X NISM Series X
Medium

Weighted Average Cost of Capital (WACC) is used as the discount rate in Discounted Cash Flow (DCF) valuation models because it reflects the average cost of capital from all sources, weighted by their proportion in the capital structure.

Practice question from NISM Series XIX A- Alternative Investments Funds (AIF) Distributors Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. True

    Correct answer

  2. B

    False

Why this is the answer

WACC is the standard discount rate in DCF to evaluate present value of future cash flows.

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