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Chapter 10
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Chapter 10

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@FirstRateEpiphany

Questions and Answers

What is the relationship between the cost of debt and equity capital and the MARR?

  • The MARR is always higher than the cost of capital
  • The MARR is independent of the cost of capital
  • The MARR is not influenced by the cost of debt and equity capital
  • The MARR is set relative to the cost of capital (correct)

    • What does MARR stand for?

  • Marginally Adjusted Rate of Return
  • Maximum Allowable Rate of Return
  • Mean Average Rate of Return
  • Minimum Acceptable Rate of Return (correct)

    • What is the weighted average cost of capital (WACC) based on?

  • Proportion of investment capital from preferred stock sources
  • Proportion of investment capital from equity sources only
  • Proportion of investment capital from debt and equity sources (correct)
  • Proportion of investment capital from debt sources only

    • What is debt capital?

    <p>Money borrowed from outside the company</p> Signup and view all the answers

    What does the cost of debt capital include?

    <p>Taxes</p> Signup and view all the answers

    What is MARR set relative to?

    <p>The cost of capital</p> Signup and view all the answers

    What does debt capital refer to?

    <p>Money borrowed from outside the company</p> Signup and view all the answers

    What is the main factor causing MARR values to change over time?

    <p>Changing circumstances</p> Signup and view all the answers

    What does the weighted average cost of capital (WACC) consider?

    <p>Proportion of investment capital from debt and equity sources</p> Signup and view all the answers

    What is the relationship between the cost of equity capital and the MARR?

    <p>They are connected in evaluating alternatives</p> Signup and view all the answers

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