Which Three of the Following Are Reasons Why Borrowing from the Bank

question 37

Multiple Choice

Which three of the following are reasons why borrowing from the bank is attractive to companies?

• A) Administrative and legal costs are low.
• B) If the economic circumstances change during the life of the loan banks are generally more willing to alter the terms.
• C) Banks are more likely to loan large amounts.
• D) The process is quick.

---

Definitions:

IRR Method

A financial analysis tool used to evaluate the profitability of investments based on the internal rate of return, which calculates the rate at which the net present value of all cash flows is zero.

Cost of Capital

The yield a corporation needs to generate from its investment initiatives to keep its market valuation steady and draw in financing.

Stand-Alone Project

In capital budgeting, a project with no competition either for the task it is to accomplish or for resources.

Cost of Capital

The rate of return a company must pay to its investors for the use of their capital, essentially the cost of financing and investing in the company's assets.