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:

Companies

Legal entities formed of individuals, shareholders, or members, aimed at operating for profit.

Excess Return

The return on an investment that exceeds the risk-free rate or a comparative benchmark or index.

Merger

A corporate strategy of combining distinct businesses under a single entity to enhance competitiveness and efficiency.

Shareholders

Shareholders are individuals or entities that own shares in a corporation, thus holding a portion of its ownership and rights to profits.