Using Market Values Rather Than Book Values for Cost of Capital

question 87

Multiple Choice

Using market values rather than book values for cost of capital computations ensures that the firm:

• A)does not ignore the value of retained earnings.
• B)gets the full value of the debt tax shield.
• C)uses expected rates of return.
• D)will not invest in negative NPV projects.

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Definitions:

Collective Representation

A process by which a group acts together to promote its members' interests, often in negotiations with employers.

Management Efforts

The actions or initiatives undertaken by management to achieve organizational objectives, improve performance, or solve problems.

Stakeholder Theory

A theory of organizational management and business ethics that addresses morals and values in managing an organization, emphasizing the importance of all stakeholders.

NLRA

The National Labor Relations Act of 1935, a foundational statute in United States labor law which protects the rights of employees to organize, bargain collectively, and engage in other union activities.