When Computing the Cost of Capital

question 95

Multiple Choice

When computing the cost of capital:

• A)Firms with business units having different levels of risk should calculate the cost of capital for each unit separately.
• B)It is not necessary to compute the cost of capital separately as the market risk across all units will average out.
• C)Using a single cost of capital for a firm with units with different market risks is advisable as it provides investors with a focused metric for assessing the returns they can expect.
• D)Determining the cost of capital is of secondary importance to the firm's forecast of sales growth,so a single cost of capital calculation for all business units is acceptable.
• E)Since assessing a firm's cost of capital cannot be done with a reasonable level of accuracy,calculating a separate cost for each business unit is not necessary.

Analyze the shortcomings of current leadership training and propose solutions.

Understand the differences between management education and training programs.

Describe the skill categories covered in management development programs.

Understand different reward systems and their perceived fairness among employees.

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Definitions:

Causal Factors

Elements or conditions that contribute to the occurrence of an event or the existence of a condition.

Method of Residues

A scientific and logical method where the known causes of a set of phenomena are subtracted to reveal the remaining causes.

Method of Residues

A method of scientific reasoning where one deducts from a complex set of phenomena the parts already explained, in order to isolate the remainder for new analysis.

Necessary Condition

A prerequisite that must be present for a certain effect or outcome to occur.