Which of the Following Statements Is Incorrect

question 155

Multiple Choice

Which of the following statements is incorrect?

• A) The further into the future a cash receipt is expected to occur, the lower is its present value.
• B) The return on investment measures the compensation a company expects to receive from investing in capital assets.
• C) Most companies use their cost of capital to estimate the minimum return on investment required from capital investments.
• D) When a company invests in capital assets, it sacrifices future dollars for the opportunity to receive present dollars.

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Definitions:

Stock Price Appreciation

The rise in the value of a company's shares over time, reflecting the market's increased valuation of the company.

Common Stock

A form of corporate equity ownership, a type of security representing ownership of a fraction of a company, providing voting rights and a share in the company’s profits.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Treasury Stock

Refers to shares that were issued and later reacquired by the company. It is subtracted from total equity.