A Firm Is Evaluating a Project That Has a Net

question 59

Multiple Choice

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8 percent is used. A discount rate of 6 percent will result in a

• A)negative net present value.
• B)positive net present value.
• C)net present value of $0.
• D)the question cannot be answered based upon the information provided.

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Definitions:

Voluntary Exchange

A transaction where both parties agree to trade goods or services by choice.

Perfect Competition

A market structure where many firms sell identical products, entry and exit are easy, and no single buyer or seller can affect prices.

Marginal Cost (MC)

The increase in total cost that results from producing 1 more unit of output. Marginal costs reflect changes in variable costs.

Marginal Cost

The financial increment incurred by the production of an extra unit of a product or service.