Different divisions with differing lines of business use different costs of capital because their cost of equity is different and also because the ________ could be different.
A) optimal volatility
B) optimal current ratio
C) optimal asset mix
D) optimal debt-equity ratio

Question

Quizplus · Accepted Answer

Different divisions may have different optimal debt-equity ratios based on the nature of their business and industry they operate in. Therefore, they may have different costs of capital depending on their debt structure.

Different Divisions with Differing Lines of Business Use Different Costs