Agreements Between Railroad Corporations to Divide the Business in a Given

question 94

Multiple Choice

Agreements between railroad corporations to divide the business in a given area and share the profits were called

• A) pools.
• B) trusts.
• C) rebates.
• D) interlocking directorates.
• E) kickbacks.

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Definitions:

M&M Proposition I

A principle in corporate finance that asserts the market value of a firm is unaffected by the capital structure, assuming no taxes and perfect markets.

M&M Proposition II

A theory proposing that the cost of equity increases with the level of debt in a company, making the firm's weighted average cost of capital remain unchanged.

Cost of Equity

The return rate that shareholders require to invest in a company's equity, taking into account the risk associated with the investment.

Cost of Debt

The effective rate that a company pays on its current debt, incorporating both interest payments and any other required repayments.