Different Divisions with Differing Lines of Business Use Different Costs

question 55

Multiple Choice

Different divisions with differing lines of business use different costs of capital because their cost of equity is different and also because the ________ could be different.

• A) optimal volatility
• B) optimal current ratio
• C) optimal asset mix
• D) optimal debt-equity ratio

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Definitions:

Corporate Level

The corporate level refers to the highest level of organizational strategy and decision making, often pertaining to the entire enterprise rather than specific divisions or products.

Board of Directors

A group of elected or appointed members who oversee the activities and governance of a company or organization.

Strategy

A plan of action designed to achieve a long-term or overall goal.

CEO

Chief Executive Officer; the highest-ranking executive in a company, responsible for making major corporate decisions and managing overall operations.