John Used to Work for a Large,well-Known Retailer

question 6

Multiple Choice

John used to work for a large,well-known retailer.He left that company to go to a smaller company,and in doing so,he discovered that the channel functions were handled very differently in the smaller firm.Looking back at his experience,he noticed that larger firms:

• A) perform many different channel functions themselves.
• B) have more control in the channel.
• C) can be more efficient.
• D) can save money.
• E) all of these.

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation of a firm’s cost of capital in which each category of capital is proportionately weighted.

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity, indicating the proportion of debt used in financing its assets.

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.