If a Project Is Assigned a Required Rate of Return

question 371

Multiple Choice

If a project is assigned a required rate of return equal to zero, then:

• A) The timing of the project's cash flows has no bearing on the value of the project.
• B) The project will always be accepted.
• C) The project will always be rejected.
• D) Whether the project is accepted or rejected will depend on the timing of the cash flows.
• E) The project can never add value for the shareholders.

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Definitions:

Current Exchange Rates

The present value of one currency in terms of another, used in converting from one currency to another.

Remeasured

Refers to the adjustment of the value of an asset or currency to reflect current market values or exchange rates.

Functional Currency

The currency of the primary economic environment in which an entity operates, usually determined by the currency in which it predominantly generates and expends cash.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.