If a fiRm Applies Its Overall Cost of Capital to All

question 329

Multiple Choice

If a firm applies its overall cost of capital to all its proposed projects, then the divisions within the firm will tend to:

• A) Receive more funding if they represent the riskiest operations of the firm.
• B) Avoid risky projects so that they will receive more funding.
• C) Become less risky over time based on the projects that are accepted.
• D) Have equal probabilities of receiving funding for their projects.
• E) Propose less risky projects than if separate discount rates were applied to each project.

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Definitions:

Transcendentalist Movement

An intellectual movement in the mid-19th century that emphasized individualism, nature, and self-reliance, primarily in the United States.

Ralph Waldo Emerson

An American essayist, lecturer, philosopher, and poet who led the transcendentalist movement of the mid-19th century, advocating for individualism and the inherent goodness of people and nature.

Ban Alcohol

The prohibition of the manufacture, sale, and consumption of alcoholic beverages, notably practiced in the United States from 1920 to 1933.

Medical Purposes

The use of substances, procedures, or treatments to diagnose, cure, treat, or prevent disease, injury, or other physical or mental impairments in humans.