In Determining the Cost of Bank Financing, Which Is the Important

question 27

Multiple Choice

In determining the cost of bank financing, which is the important factor?

• A) prime rate
• B) nominal rate
• C) annual rate
• D) discount rate

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Definitions:

Incremental Value

The additional or extra value created by undertaking a new project or activity compared to not doing it, often considered in decision-making processes.

All-Equity Firms

Companies that finance their operations without any debt, relying solely on shareholder equity.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including those held by institutional investors and restricted shares held by insiders and company officers.

Market Price

The ongoing rate at which a service or asset is available for purchase or sale in the market.