If a Company Borrows Money to Finance an Investment and the Return

question 41

Multiple Choice

If a company borrows money to finance an investment and the return on the investment turns out to be lower than the cost of borrowing, which of the following statements is true?

• A)The shareholders will earn a lower rate of return than if they hadn't borrowed money.
• B)The shareholders will earn a higher rate or return than if they hadn't borrowed money.
• C)The venture will break even, but not earn a return.
• D)The investment will lose more money than if it had not been financed by debt.

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Definitions:

CS

An abbreviation for conditioned stimulus, which in classical conditioning is a previously neutral stimulus that, after association with an unconditioned stimulus, comes to trigger a conditioned response.

US

Refers to the United States, a country located primarily in North America.

Contiguous

Adjacent or sharing a common border; physically touching or next to each other.

Fear Conditioning

A learning process where an individual associates a previously neutral stimulus with an aversive event, leading to the elicitation of a fear response to the neutral stimulus.