Expected rate of return on investment is called_______ of capital.

marginal efficiency

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average efficiency

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opportunity cost

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rate of interest

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Solution

The correct option is A marginal efficiency
Marginal efficiency of capital refers to the rate of return that is expected from an additional unit of investment made or capital utilised. The marginal efficiency of capital, thus, precisely represents the expected rate of return on investment.

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Financial leverage is called favourable if

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(b) Rol is higher than the cost of debt

(d) If the degree of existing financial leverage is low

Financial leverage is called favourable if

(a) Return on investment is lower than the cost of debt

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(d) If the degree of existing financial leverage is low

R s . 100

R s . 20

15 %

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