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:

Accounting Record

Documentation that contains the financial history and transactions of a company.

Shareholders' Equity

The amount of a company's total assets minus its total liabilities, representing the owners' share of the company.

Normal Balance

The side (debit or credit) on which increases to an account are recorded, based on the type of account.

Normal Balances

Refers to the side of an account (debit or credit) where increases in the account are recorded.