The Opportunity Cost of Capital for a Risky Project Is

question 5

Multiple Choice

The opportunity cost of capital for a risky project is:

• A)the expected rate of return on a government security having the same maturity as the project.
• B)the expected rate of return on a well-diversified portfolio of common stocks.
• C)the expected rate of return on a security of similar risk as the project.
• D)the expected rate of return on a typical bond portfolio.

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Definitions:

Current Liabilities

Debts or obligations that a company expects to pay off within one fiscal year, including accounts payable, short-term loans, and accrued expenses.

Current Assets

Assets that a company expects to convert into cash, sell, or use up within one year or within its operating cycle if longer than a year.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous period.

Accrued Liabilities

Liabilities that have been incurred but not yet paid or recorded at the end of the accounting period.