Estimating a Divisional Cost of Capital by Comparing the Division

question 18

Multiple Choice

Estimating a divisional cost of capital by comparing the division to a similar free-standing company is known as

• A) Divisional Average Cost of Capital approach (DACC).
• B) Segmental Capital Structure approach. (SCS).
• C) the "pure play" approach.
• D) Project Specific Approach (PSA).

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Definitions:

Endowment

In economics, the total resources available to an individual or entity, including assets, income, and inherited resources.

Net Demand

The difference between total market demand and market supply, representing the excess demand or shortage in the market.

Utility Function

An economic concept expressing how different combinations of goods or services yield different levels of utility or satisfaction to an individual.

Endowment

The initial allocation of income, goods, or resources that individuals or firms possess in an economy, often impacting their trading capabilities and outcomes in markets.