Consider the Following Equation

question 28

Multiple Choice

Consider the following equation:
Β_U =
Β_E +
Β_D
The term β_U in the equation is:

• A)the same as the beta of the firm's assets.
• B)the required return on the firm's equity.
• C)the proportion of the firm financed with equity.
• D)equal to zero if the firm's debt is riskless.

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Definitions:

ACP

Average Collection Period, a metric that measures the average number of days it takes for a company to collect its accounts receivable.

Processing Float

The time lag between when a check is written and when it is actually deducted from the payer's account, affecting the available balance.

Check Clearing

The process by which banks exchange checks and other negotiable instruments drawn on each other and settle their mutual debts and credits.

Lockbox System

A service provided by banks to companies for the receipt of payment from customers, under which payments are directed to a special post office box rather than the company’s address.