According to the Chapter Case,ABB Decided to Switch from Its

question 50

Multiple Choice

According to the chapter case,ABB decided to switch from its existing corporate intranet for all of the following reasons except:

• A)the intranet was too expensive to maintain.
• B)the intranet was too static and outmoded to meet its current needs.
• C)the intranet had poor capabilities for searching for information.
• D)the intranet lacked collaboration tools.
• E)the intranet was confusing and inefficient.

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Definitions:

Cost of Equity

The compensation that investors demand for bearing the risk of owning stock, usually reflected by earnings or dividend growth expectations.

Required Rate of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

M&M Proposition II

Part of the Modigliani-Miller theorem stating that a company's cost of equity increases as its level of debt increases, due to the higher risk of default.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk of owning equity in the company.