In the Diversified Firm,internal Capital Allocation May Provide Greater Gains

question 11

Multiple Choice

In the diversified firm,internal capital allocation may provide greater gains relative to external capital market allocation because:

• A) internal capital allocation always leads to an optimal level of diversification.
• B) the corporate office has superior information about its businesses compared to the information investors have about those enterprises.
• C) the firms act as a mutual fund when investing internal capital.
• D) management maintains control of all invested capital.

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