Sam Jones Has an Engineering Firm

question 42

Multiple Choice

Sam Jones has an engineering firm.He wants to build a new headquarters building.The building will cost $1,500,000.He will put down $450,000 and have a bank finance the remainder at prime plus 2 percent.The prime lending rate is currently 8.5 percent.Sam will withdraw the money for the down payment from his mutual fund account where he has earned 13% for the last ten years.What is Sam's weighted average cost of capital?

• A)11.25%
• B)8)5%
• C)13.00%
• D)10.5%

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Definitions:

Pleasure Principle

The principle by which the id functions to avoid pain and maximize pleasure.

Id

To Freud, the aspect of personality allied with the instincts; the source of psychic energy, the id operates according to the pleasure principle.

Ego

To Freud, the rational aspect of the personality, responsible for directing and controlling the instincts according to the reality principle. To Jung, the conscious aspect of personality.

Libido

in psychoanalytic theory, refers to the sexual or life drive that motivates individuals to seek pleasure and avoid pain.