The Extent to Which a Measure Adds to the Prediction

question 46

Multiple Choice

The extent to which a measure adds to the prediction of a variable beyond what can be predicted with other measures is known as

• A) incremental validity.
• B) discriminant validity.
• C) criterion validity.
• D) convergent validity.

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Definitions:

After-Tax Cost of Debt

The net cost to a company for borrowing funds, calculated by subtracting the tax benefits of interest expenses from the total interest paid.

Cost of Equity

The Cost of Equity is the return a company requires to decide if an investment meets capital return requirements and is often used in financial analysis and valuing companies.

Weighted Average Cost of Capital (WACC)

A computation of an enterprise's cost of capital, with each capital category assigned a proportional weight.

Weighted Average Cost of Capital (WACC)

A measure of a firm's cost of capital in which each category of capital is proportionately weighted.