When a Manager Analyzes a Project Using Only the Incremental

question 339

Multiple Choice

When a manager analyzes a project using only the incremental cash flows related to the project, the manager is following the _____ principle.

• A) Erosion.
• B) Net present value.
• C) Opportunity.
• D) Side effect.
• E) Stand-alone.

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Definitions:

Yield-To-Maturity

The expected total yield on a bond when held to its maturity date, stated as a yearly percentage.

Coupon Rate

The interest paid annually on a bond, indicated as a percentage of its face value.

Annually

Occurring once every year, often used to describe events or measurements that are taken or occur once per year.

Maturity

In finance, maturity is the time at which the principal amount of a bond, loan, or other debt instrument becomes due and payable.