A Firm Has a Return on Equity of 12

question 37

Multiple Choice

A firm has a return on equity of 12.4 per cent according to the dividend growth model and a return of 18.7 per cent according to the capital asset pricing model.The market rate of return is 13.5 per cent.What rate should the firm use as the cost of equity when computing the firm's WACC?

• A)13.5 per cent
• B)18.7 per cent because it is higher than 12.4 per cent
• C)The arithmetic average of 12.4 per cent,13.5 per cent,and 18.7 per cent
• D)12.4 per cent because it is lower than 18.7 per cent
• E)The arithmetic average of 12.4 per cent and 18.7 per cent

Define and comprehend the characteristics of American options.

Differentiate between the foreign currency and home currency approaches to capital budgeting and recommend approaches for different scenarios.

Define exchange rate risk and identify its sources along with management strategies.

Understand the significance and definition of the London Interbank Offer Rate (LIBOR).

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Definitions:

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, encouraging the occurrence of desired behaviors.

Autism Spectrum Disorder

A disorder of development that manifests through challenges in social interaction and communication, coupled with limited or repetitive thought and behavior patterns.

Intensive Behavioral Intervention

A comprehensive, individualized treatment strategy often used for children with autism, aimed at improving social, communicational, and learning skills through positive reinforcement.

Behavior Modification

Behavior modification is the use of empirical and methodical techniques to change behavior, typically using reinforcement or punishment.