A Lowering of the Required Reserve Ratio Might Not Expand

question 8

Multiple Choice

A lowering of the required reserve ratio might not expand the money supply if:

• A) tax rates are also lowered at the same time.
• B) tax rates are increased at the same time.
• C) borrowers are unwilling to borrow the new funds the banks have available for loans.
• D) borrowers are willing to borrow the new funds the banks have available for loans..

Differentiate between book value and market value and understand the relevance of each in calculating WACC.

Analyze capital structure using market values to calculate the firm's WACC.

Understand the concept of marginal cost of capital (MCC) and its implications for capital budgeting.

Explain the importance of flotation costs and their impact on capital component costs and WACC.

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Definitions:

Delegation

The act of transferring to another person the authority to perform a particular task or function.

Assignment

The transfer of rights, duties, or interests from one party to another.

Obligation

A legal or moral duty or responsibility that one party owes to another, enforceable by law.

Discharged

Released from a legal duty or liability, often used in contexts as being discharged from a contractual obligation or from bankruptcy.