A Company Invests in a Project That Realizes an Internal

question 47

Multiple Choice

A company invests in a project that realizes an internal rate of return equal to its cost of capital. This project should:

• A)increase the value of the company.
• B)have little or no effect on the value of the company.
• C)decrease the value of the company.
• D)cause the company to realize an infinite net present value.

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Definitions:

Profitability

The financial gain made by a business, calculated as total revenues minus total costs.

Advertising

is a marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service, or idea.

Positive Gain

An increase in value or beneficial results obtained from a certain action or investment.

Business Operation

Refers to the day-to-day activities and responsibilities involved in running a business.