In Using Nestle Corporation as a Model, When a Subsidiary

question 10

Multiple Choice

In using Nestle Corporation as a model, when a subsidiary is first formed, about one-half of the financing needed to acquired fixed assets comes from:

• A)debt
• B)federal funds
• C)tax breaks
• D)equity from the parent company

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Definitions:

Rate Of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Required Return

The lowest profit anticipated by an investor from a specific asset or project investment.

Profitability Index

A financial metric that calculates the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.

Required Rate

The minimum return an investor expects to achieve by investing in a particular asset, often used in capital budgeting.