Assume That an Organization's Weighted-Average Cost of Capital (Minimum Rate

question 38

Multiple Choice

Assume that an organization's weighted-average cost of capital (minimum rate of return) is 8% and that Division A currently has a 12% return on investment (ROI) . The manager of Department A, who is evaluated on the basis of divisional ROI, would most likely accept an investment that is expected to return:

• A) More than 8%.
• B) More than 12%.
• C) More than 8% but less than 12%.
• D) Less than 12%.
• E) Impossible to tell without further information.

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Definitions:

Compensation of Employees

Payments and benefits received by employees in exchange for their labor, including wages, salaries, and benefits such as health insurance.

Total Income

The sum of all earnings or revenues received by an individual or organization before any deductions or taxes.

Compensation of Employees

All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

Human Capital

The collective skills, knowledge, and experience of an individual or workforce, viewed as an asset.