Different Divisions with Differing Lines of Business Use Different Costs

question 12

Multiple Choice

Different divisions with differing lines of business use different costs of capital because their cost of ________ could be different.

• A) debt
• B) equity
• C) capital
• D) assets

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Definitions:

Interest

The cost of borrowing money or the reward for saving, typically represented as a percentage of the principal amount over a specific period.

Borrowed

Money that one has taken on loan from another party, under the condition that it will be repaid, usually with interest, at a later date.

Interest

The charge for borrowing money or the return on invested capital, usually expressed as an annual percentage rate.

Interest Rate

The fraction of a borrowed sum that incurs interest charges for the borrower, often expressed in terms of a yearly percentage.