alleryStart learning →Value is added to a firm when its return on capital is above which rate?
ACorporate income tax
BFirm's cost of capital
CGeneral inflation rate
DEquity dividend yield
Answer & Solution
Correct answer: B. Firm's cost of capital
Earning more than the cost of funds leaves a surplus, which adds to firm value.
Keep practising Financial Management
Browse all Financial Management questions for CA Inter, or explore more Financial Management topics.
Related questions
The cash conversion cycle measures which risk entailed by growth?A negative cash conversion cycle means a firm collects from customers?Inventory period is 45 days and receivables period is 30 days. The operating cycle is?In common law jurisdictions, to whom do directors owe fiduciary duties?Mandatory audits of financial statements help reduce what?Which pay design best aligns managers with the owners' interests?A manager who expands firm size instead of profits is engaged in what?In the shareholder and management agency problem, who is the agent?