Using Market Values Rather Than Book Values for Cost of Capital

question 55

Multiple Choice

Using market values rather than book values for cost of capital computations insures that the firm:

• A) does not ignore the value of retained earnings.
• B) gets the full value of the debt tax shield.
• C) uses expected rates of return.
• D) will not invest in negative NPV projects.

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Definitions:

Role Construct Repertory

A method used in personal construct psychology to assess an individual's system of personal constructs, involving comparing and contrasting significant people in one's life.

Needs Hierarchy

A theory proposed by Abraham Maslow that outlines a progression of human needs, from basic physical needs to complex psychological needs, leading to self-actualization.

Construct System

A psychological concept that refers to the collection of cognitive structures an individual uses to interpret and predict events in the world.

Emotional State

The current condition of a person’s emotions or feelings which can affect perception, behavior, and physical responses.