If a Firm Earns 10% Return on Funds They Borrowed

question 192

True/False

If a firm earns 10% return on funds they borrowed at 15% interest, the owners of the firm realize a benefit from using leverage.

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Definitions:

Disney Vault

A term referring to the practice by The Walt Disney Company of putting its films into moratorium, making them unavailable for purchase for a specified period.

Scarcity

A condition of limited resources available, making them more valuable or desirable.

Lowballing Technique

A persuasion and sales strategy where an initially lower price is presented to get agreement, only to increase it later on.

Foot-In-The Door Technique

A compliance tactic that involves getting a person to agree to a large request by first setting them up by having them agree to a modest request.