What Is a Key Implication of Expectancy Theory When Applied

question 70

Multiple Choice

What is a key implication of expectancy theory when applied to pay systems?

• A) Employees must get pay raises to cover increased living costs.
• B) Employees expect their managers to be competent.
• C) Employers expect their employees to be competent.
• D) Rewards must be valuable for motivation to occur.

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Definitions:

M&M Proposition I

A principle in corporate finance that asserts the market value of a firm is unaffected by the capital structure, assuming no taxes and perfect markets.

M&M Proposition II

A theory proposing that the cost of equity increases with the level of debt in a company, making the firm's weighted average cost of capital remain unchanged.

Cost of Equity

The return rate that shareholders require to invest in a company's equity, taking into account the risk associated with the investment.

Cost of Debt

The effective rate that a company pays on its current debt, incorporating both interest payments and any other required repayments.