Abilene Is a 52-Year-Old Who Strongly Believes in the Power

question 111

Multiple Choice

Abilene is a 52-year-old who strongly believes in the power of education. She has joined community classes for French and Spanish languages and reads books in those languages. She believes enriching her wisdom and world knowledge will help her become a better person. Abilene's knowledge of French and Spanish illustrates her _____.

• A) emotional intelligence
• B) existential intelligence
• C) interpersonal intelligence
• D) crystallized intelligence

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Definitions:

Target Capital Structure

The relative amount of debt, preferred stock, and common equity that the firm desires. The weighted average cost of capital should be based on these target weights.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, a crucial part of capital budgeting and often calculated using models like CAPM.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. It represents the average rate that a company is expected to pay to finance its assets.

Cost of Debt

The effective rate that a company pays on its borrowed funds from financial institutions and other sources.