The APV Method to Value a Project Should Be Used

question 75

Multiple Choice

The APV method to value a project should be used:

• A) When the project's level of debt is known over the life of the project
• B) When the project's target debt to value ratio is constant over the life of the project
• C) When the project's debt financing is unknown over the life of the project
• D) None of the above

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Definitions:

Free-Rider Problem

A situation where some individuals consume more than their fair share of a public resource, or do not pay for their share, leading to underproduction or depletion of the resource.

Drop-In-The-Bucket Problem

A problem intrinsic to public goods: The good or service is usually so costly that its provision generally does not depend on whether any single person pays.

Public Goods

Goods or services that are non-excludable and non-rivalrous, meaning they are freely available to all and used by one person does not reduce availability to others.

Positive Externality

A benefit received by a third party resulting from an economic transaction in which they were not involved.