Which of the Following Occurs as a Firm Moves from Local

question 53

Multiple Choice

Which of the following occurs as a firm moves from local option systems to regional and global systems?

• A)Agency costs increase.
• B)Coordination costs decrease.
• C)Transaction costs increase.
• D)Both transaction and agency costs increase.
• E)All costs increase.

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Definitions:

Risk Premium

The extra return expected by an investor for holding a risky asset, over and above the risk-free rate.

Discount Rate

The interest rate used in calculating the present value of future cash flows. It reflects the time value of money and risk.

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the real cost of funds to the borrower and the real yield to the lender or investor.

Nominal Net Cash Flow

The total amount of cash that flows into and out of a business, not adjusted for inflation.