David Is Trying to Decide Whether to Add Capital Through

question 83

Multiple Choice

David is trying to decide whether to add capital through investing more of his own money or through borrowing money from the bank.To help him decide, you remind him that as long as his business's rate of return on its assets is greater than the cost of the debt, his rate of return on equity will _____ as the business uses more debt.

• A)decrease
• B)increase
• C)remain the same
• D)fluctuate

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Definitions:

Vivid

Producing powerful feelings or strong, clear images in the mind, often used to describe memories, descriptions, or dreams.

Schema

A cognitive framework or concept that helps organize and interpret information in the brain.

Availability Heuristic

A cognitive shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

Amnesia

A loss or disturbance of memory, often due to brain injury, disease, or psychological trauma, impairing the ability to recall past experiences.