The graph shows the IRR on the vertical axis and investment outlays on the horizontal axis. The lines labeled K l and K g represent the cost of capital under local and international capital structures, respectively. The lines labeled I l and I g represent the optimal investment outlays under the alternative capital structures. Therefore, option B correctly specifies the variables represented in the graph.

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In the Graph

Question 78

Multiple Choice

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) None of the above

Correct Answer: