Firms Should Stay in a Business Relationship

question 46

Multiple Choice

Firms should stay in a business relationship:

• A) If there are viable alternatives
• B) If and only if it is cost minimizing
• C) When technical features "bind" the parties
• D) When they evidence diffidence
• E) If there is major cost-cutting

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Definitions:

EPS

Earnings Per Share, a financial metric that divides a company's profit by the number of its shares outstanding.

Market Capitalization Rate

The expected return on an investment in a market portfolio, based on the market price of risk.

Constant-Growth DDM

A model for valuing a company's stock by using predicted dividends and discounting them back to present value assuming a constant growth rate.

Preferred Share

A class of ownership in a corporation with a higher claim on assets and earnings than common stock.