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CFP Certified Financial Planner Test Prep

Category - Foundation

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What would be the market value of a company if its annual cash profit is $8 million and its WACC is 10%?

$90 million
$85 million
$80 million
None of the above

Explanation

Answer: C - The market value of a company is equal to its annual profits divided by its WACC. In this case, $8 million / 0.10 = $80 million.

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