If a Project's Expected Rate of Return Exceeds Its Opportunity

question 88

Multiple Choice

If a Project's expected rate of return exceeds its opportunity cost of capital, one would expect:

• A)the profitability index to exceed 1.0.
• B)the opportunity cost of capital to be too low.
• C)the IRR to exceed the opportunity cost of capital.
• D)the NPV to be zero.

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Definitions:

Center

The point that is equally distant from every point on the circumference of a circle or sphere; by extension, a balanced or neutral position in discussions or analysis.

Price Level

The overall mean price of all current goods and services in the economic setting.

Curve

In economics, a graphical representation showing the relationship between two varying quantities, such as supply and demand.

Slope

A measure of the steepness, incline, or grade of a line, representing the rate of change between variables on a graph.