Even If Family Members Lack the Capability to Run the Business

question 43

True/False

Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent.

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investments to maintain its market value and satisfy its shareholders or debtholders.

Future Inflation

Anticipated increase in the price level of goods and services in the future, affecting purchasing power.

Market Risk Premium

The additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often based on the risk of investing in that company's equity.