Capital Budgeting Decisions Are Risky Because All of the Following

question 149

Multiple Choice

Capital budgeting decisions are risky because all of the following are true except:

• A)The outcome is uncertain.
• B)Large amounts of money are usually involved.
• C)The investment involves a long-term commitment.
• D)The decision could be difficult or impossible to reverse.
• E)They rarely produce net cash flows.

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Definitions:

Dividend

Money distributed by a corporation to its shareholders, often as a share of the earnings.

Reward-to-volatility Ratio

A ratio used to assess the return of an investment relative to its risk, calculated by dividing the excess return of an investment by its standard deviation.

Standard Deviation

A statistical measure of the dispersion of a set of data from its mean, often used to quantify the risk associated with a particular investment.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature in one year or less, representing a secure, low-risk investment option.