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:

Malpighian Tubules

Excretory tubes uniquely found in the digestive system of insects and arachnids, serving to remove waste products from the blood.

Major Nitrogenous Waste

The primary form of nitrogen excreted by organisms, which varies among species (urea in mammals, uric acid in birds and reptiles, and ammonia in aquatic organisms).

Annelids

A phylum of segmented worms that includes earthworms and leeches, characterized by their segmented bodies and presence in diverse habitats.

Nitrogenous Waste

Waste products containing nitrogen, such as ammonia, urea, and uric acid, produced by the metabolism of proteins and nucleic acids.