ABC Corpa US Corporation Is Evaluating a Proposal to Construct and and Lease

question 68

Multiple Choice

ABC Corp.a US corporation is evaluating a proposal to construct and lease an office building in Kiev.ABC's weighted average cost of capital is 11%.The risk free rate in the United States is 3.75%.ABC believes that conditions in Kiev warrant a required rate of return that is 12% above the risk-free rate.Cash flows from the hotel project should be discounted at [blank].

• A)23%
• B)14.75%
• C)15.75%
• D)12%

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Definitions:

Acquisition Method

An accounting technique used in mergers and acquisitions to consolidate the financial statements of the acquiring and acquired entities by recording assets at fair value and recognizing goodwill.

Voting Shares

Shares that give the shareholder the right to vote on matters of corporate governance.

Accounting Implications

The effects or outcomes that accounting practices and principles have on financial statements and business decisions.

Business Combination

A transaction or event in which two or more businesses come together to form one company.