The Crossover Point Is Defined as the Discount Rate That

question 212

Multiple Choice

The crossover point is defined as the discount rate that:

• A) Causes the net present value of a project to equal zero.
• B) Causes the IRR of one project to exceed the IRR of a second project.
• C) Indicates the point where the IRR equals zero as IRR moves in a downward direction.
• D) Makes the net present values of two projects equal.
• E) Causes a project to move from a positive net present value to a negative net present value.

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Definitions:

Equity Method

An accounting technique used for recording investments in associate companies where the investment is initially recorded at cost and adjusted thereafter for the post-acquisition change in the investor's share of net assets of the investee.

Stock Investments-Long

Investments in stock securities intended to be held for a long-term period for capital appreciation, dividend income, or both.

Common Stock

Equity securities representing ownership in a company, entitling holders to vote and share in the company's profits.

Net Income

The financial term for the total earnings or profit of a company after all expenses and taxes have been subtracted from total revenue.