In the graph, A)K^l and K^g represent,respectively,the cost of capital under international and local capital structures; IRR represents the internal rate of return on investment projects; I^l and I^g represent,respectively,the optimal investment outlays under the alternative capital structures. B)K^l and K^g represent,respectively,the cost of capital under local and international capital structures; IRR represents the internal rate of return on investment projects; I^l and I^g represent the optimal investment outlays under the alternative capital structures. C)both of the options D)none of the options

Question

Quizplus · Accepted Answer

The labels K^l and K^g represent the cost of capital under local and international capital structures, respectively, as indicated by the axis labels. IRR represents the internal rate of return on investment projects, which is also clearly labeled. Finally, I^l and I^g represent the optimal investment outlays under the alternative capital structures, as indicated by the axis labels. Therefore, option B is the correct answer.

In the Graph