A firm finances its activities with both debt (that costs 8%) and equity (that costs 14%) .The firm can borrow additional funds at 8% if it so desires.A financial analyst at this firm argues that the firm should undertake only those investments that earn a return of at least 14% because only those investments will increase shareholder value If a firm decides to make investments based on this logic it will ________.
A) decline to make investments that it should undertake
B) undertake investments that it should decline
C) make only those investment decisions that increase shareholder value
D) maximize its stock price
Correct Answer:
Verified
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