Which Three of the Following Could Result If the Cost

question 3

Multiple Choice

Which three of the following could result if the cost of capital as a discount rate is too high?

• A) Shareholders will miss out on value- enhancing opportunities.
• B) Firms will not grow as they should.
• C) Investment will be constrained.
• D) Bank lending is likely to fall as a proportion of investment levels.

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Definitions:

Financial Statement

A written report that quantitatively describes the financial health of a company, including the balance sheet, income statement, and cash flow statement.

First Statement

Broadly refers to the initial financial statement or report produced for a specific period; contextually could vary (e.g., income statement, balance sheet).

Internal Users

Individuals within an organization who use the company's financial information for decision-making, including management and employees.

External Users

Individuals or entities outside a company who use its financial statements, such as investors, creditors, and regulatory agencies.