Which of the Following Statements Is FALSE

question 41

Multiple Choice

Which of the following statements is FALSE?

• A)A public warehouse is a business that exists for the sole purpose of storing and tracking the inflow and outflow of the inventory.
• B)A warehouse arrangement is the riskiest collateral arrangement from the standpoint of the lender.
• C)Because the warehouser is a professional at inventory control,there is likely to be little loss due to damaged goods or theft,which in turn lowers insurance costs.
• D)A field warehouse is operated by a third party,but is set up on the borrower's premises in a separate area so that the inventory collateralizing the loan is kept apart from the borrower's main plant.

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Definitions:

Hurdle Rate

The minimum rate of return on an investment required by an investor or manager, used to assess its viability.

Cost Of Capital

The rate of return that a business must achieve to meet the expectations of its investors and creditors, representing the opportunity cost of investing capital in a specific business.

IRR

The Internal Rate of Return; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Salvage Value

The foreseen market valuation of an asset at the lifespan’s end.