In the Net Operating Income Approach to Cost-Of-Capital Analysis,a Firm's

question 137

Multiple Choice

In the Net Operating Income approach to cost-of-capital analysis,a firm's value depends on:

• A) its net operating income.
• B) its use of debt.
• C) size of the firm.
• D) retained earnings as a proportion of debt.

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Definitions:

Interest

The cost of borrowing money or the return on invested funds, usually expressed as an annual percentage rate.

Cash Flow

The comprehensive measure of funds circulating in and out of a business entity, chiefly in relation to its cash solvency.

Operating Cash Flows

Cash generated from the primary activities of a business, such as revenue from sales, minus operating expenses.

Total Assets

The sum of all assets owned by a company, including current and non-current assets, as recorded in the balance sheet.