Which of the Following Is NOT Required for an Investor

question 56

Multiple Choice

Which of the following is NOT required for an investor to have control over an investee?

• A) The investor must have power over the investee.
• B) The investor must have exposure to variable returns from the investment.
• C) The investor must be able to use its power to affect the amount of its returns.
• D) The investor must currently own a majority of the voting shares of the investee.

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Definitions:

Cash Flows

The complete sum of financial resources being exchanged within a business, profoundly impacting its immediate financial health.

Component Cost Of Debt

The effective rate that a company pays on its current debt, incorporating both interest rates and other costs associated with borrowing.

Component Cost Of Equity

The rate of return that a company must offer investors to encourage investment in its equity, accounting for risk.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project by discounting future cash flows to their present value.