Multidivisional Companies with Diverse Operations Should Use an Interest Rate

question 40

Multiple Choice

Multidivisional companies with diverse operations should use an interest rate for discounting a specific division's estimated cash flows in capital budgeting that is representative of:

• A)the entire firm's cost of capital.
• B)the riskiness of the specific division's cash flows.
• C)the cost of capital obtained through the application of the pure play method.
• D)Either b or c

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Definitions:

Fixed Fee

A pre-determined and agreed-upon total charge for a specific service or project, not subject to change based on the amount of time or resources used.

Critical To Project

Elements or factors that are essential for the successful completion of a project, without which the project cannot proceed or succeed.

Quality And Schedule Needs

The requirements concerning the standard of work to be delivered and the timeline for its completion in a project.

RFQ

Stands for Request for Quotation, a document that invites suppliers to submit a quote for the supply of specific goods or services.