Different Divisions with Differing Lines of Business Use Different Costs

question 26

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
• E)cost of debt

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Definitions:

Increase in Quantity

A rise in the amount of goods or services produced or supplied.

Market Equilibrium

The state in which market supply and demand balance each other, leading to stable prices.

Prices of Resources

Refers to the cost associated with the inputs required for production, including labor, capital, and materials.

Determinant of Supply

Factors that influence the quantity of a good or service that producers are willing and able to sell at a given price, such as production technology, input prices, and expectations of future prices.