If a Firm Finances a New Project Using Its Own

question 3

Multiple Choice

If a firm finances a new project using its own funds,

• A) the cost is minimal
• B) the opportunity cost of borrowing has been avoided
• C) investment funds will be in excess supply
• D) the financing charges are the measure of the real interest rate
• E) the interest rate represents the firm's opportunity cost

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period, ending with net income or loss.

Administrative Expense

Expenses related to the general operation of a business, such as office salaries and utilities, not directly tied to production.

Selling Expense

Costs incurred directly from selling goods or services, including advertising, sales commissions, and store maintenance.

Cost of Goods Sold

Cost of Goods Sold (COGS) measures the direct costs associated with producing goods that a company sells during a period, including materials and labor.