Question : Question
Earning an "accounting profit" often more : 9672
Earning an "accounting profit" is often more important than earning an "economic profit" because the cost of is included in determining accounting profit, and therefore this is better calculation (measure) of the actual earning power of the firm. a. True. b. True in theory, but not always in actual practice. c. False d. False, because accounting and economic profit are essentially the same concept. e. B and D All else equal, a firm with a low Beta will have a(n) ________ cost of capital. a. Highly variable b. Very stable c. Above average; high d. Below average, low e. A and C When interest rates rise, the firm's cost of capital will ________, and the value of the firm will ________ a. Rise/Fall b. Rise/Rise c. Fall/Rise d. Fall/Fall e. Fall initially, but then rise steeply/not be affected since any effect on the cost of capital will be off-set by changes in leverage.