An Investment That Guarantees Its Holder $100 Return and Another

question 85

True/False

An investment that guarantees its holder $100 return and another investment that earns $0 or $200with equal chances over the same period have equal risk.

---

Definitions:

After-tax Salvage Value

The value of a depreciated asset after deducting any taxes owed on the sale of the asset.

Incremental Operating Cash Flow

The additional amount of cash flow a company generates from its operating activities due to a specific decision or project.

Capital Spending

Expenditures by a company for the acquisition or improvement of long-term assets such as property, plants, and equipment in order to expand its operations or efficiency.

Sunk Cost

Costs that have already been incurred and cannot be recovered, and thus should not influence current/future business decisions.