Which of the Following Statements Is True

question 59

Multiple Choice

Which of the following statements is true?

• A)Although the expected borrowing rates and lending rates of large firms are different from those of small firms, both groups have borrowing rates that are very close to what they can
• Earn if they lend their money.
• B)Large firms' required expected borrowing costs are close to the expected returns they could earn by lending money to firms of similar risk to themselves.
• C)In reality, there are large spreads between borrowing and lending rates for both large and small firms.
• D)The net present value of a project should be independent of the firm undertaking the investment.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.

Cash Sales

Transactions in which payment is made in cash at the time of sale, rather than on credit.

MasterCard

A global financial services corporation that processes payments between banks of merchants and the card issuing banks for purchases made with credit and debit cards.

VISA

A global payment technology company that facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards and debit cards.