If a Company's Required Rate of Return Is 9%, and in Using

question 121

Multiple Choice

If a company's required rate of return is 9%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is

• A) equal to 9%.
• B) greater than 9%.
• C) less than 9%.
• D) unacceptable for investment purposes.

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Definitions:

Aging Asset Base

Refers to a company's fixed assets becoming older and potentially less efficient or valuable over time.

Expensing R&D

The process of charging research and development costs as expenses in the period they are incurred rather than capitalizing them.

Conservatism Principle

an accounting principle that guides companies to report lower values for assets and revenues, higher values for liabilities and expenses when in doubt, ensuring that financial statements do not overstate the company’s financial position.

Impairment Loss

The amount by which the carrying amount of an asset exceeds its recoverable amount, leading to a decrease in the asset's value on the balance sheet.