Question
Why does financial leverage increase both return and risk to equity holders?
Tap to flip
Answer
Debt magnifies gains and losses available to common equity.
Tap to flip back
Question
How does CAPM estimate the cost of equity?
Tap to flip
Answer
Risk-free rate plus beta times the market risk premium.
Tap to flip back
Question
What does opportunity cost mean in decision-making?
Tap to flip
Answer
The value of the next-best forgone alternative.
Tap to flip back
Question
Why does elastic demand matter for pricing decisions?
Tap to flip
Answer
A price increase lowers total revenue when demand is elastic.
Tap to flip back