An Individual Finds That as His Income Increases, His Total

question 24

Multiple Choice

An individual finds that as his income increases, his total utility also increases but at a decreasing rate. This can be attributed to:

• A) diminishing marginal utility.
• B) being risk-neutral.
• C) expected values.
• D) efficient allocation of risk.

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Definitions:

WACC

Weighted Average Cost of Capital (WACC) is the average rate that a company is expected to pay to finance its assets, incorporating the cost of equity and debt.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project, calculated by discounting future cash flows to their present value and subtracting the initial investment.

IRR

Internal Rate of Return; a metric used in capital budgeting to estimate the profitability of potential investments.

MIRR

Modified Internal Rate of Return, a measure used in capital budgeting to estimate the profitability of potential investments.