To Avoid the Awkward Process of Transferring the Cost of Capital

question 7

Multiple Choice

To avoid the awkward process of transferring the cost of capital going from the parent to the subsidiary,it is advisable to use the _______ rate.

• A)prime market interest
• B)all-equity discount
• C)all-debt discount
• D)both the equity and debt discount

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Definitions:

Modus Ponens

A logical argument form where if a conditional statement ("if p then q") and its antecedent (p) are true, then the consequent (q) is also true.

Antecedent

In logic and grammar, the antecedent is the preceding clause, phrase, or word to which another word, particularly a pronoun, refers back.

Pure Hypothetical

A speculative statement or proposition that is considered in abstraction from any particular instance or factual situation.

Premise

An initial statement or proposition from which other statements are derived or reasoned out.