If a Company's Expected Return on Invested Capital Is Less

question 14

True/False

If a company's expected return on invested capital is less than its cost of equity, then the company must also have a negative market value added (MVA).

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Definitions:

Outsourcing

The practice of hiring external firms to perform tasks, handle operations, or provide services that are either difficult to manage or outside the company's expertise.

Reengineering

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance.

Statistical Method

A technique or procedure applied to numerical data for the purpose of analyzing, interpreting, or explaining statistical phenomena.

Employee Leasing

A practice where businesses hire their workers through a professional employer organization, which then handles HR, payroll, and other administrative tasks.