Testing a New Project on a Smaller Isolated Area Prior

question 13

Multiple Choice

Testing a new project on a smaller isolated area prior to installing it for the entire organization is an example of ________ a risk.

• A) transferring
• B) escalating
• C) avoiding
• D) retaining
• E) mitigating

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Definitions:

Net Present Value (NPV)

Net Present Value is a method used in capital budgeting to evaluate the profitability of an investment or project, calculating the present value of all cash inflows and outflows using a specified discount rate.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used in capital budgeting to estimate the profitability of potential investments.

Payback Method

An investment appraisal technique that calculates the time needed for an investment to generate cash flows sufficient to recover the initial cost.

Weighted Average Cost of Capital (WACC)

A calculation of a company's cost of capital in which each category of capital (debt, equity) is proportionally weighted.