Assuming the Cost of Capital Is 10

question 23

Multiple Choice

Assuming the cost of capital is 10.0%, which of the following results indicates the investment should NOT be made?

• A) The net present value is 0.0
• B) The benefit cost ratio is 0.5
• C) The internal rate of return is greater than the cost of capital
• D) The payback period is three years

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Definitions:

Capacity

Refers to the legal competence of an individual or organization to enter into a binding contract and understand the obligations it imposes.

Bargaining

The process of negotiating the terms of an agreement or contract between two or more parties.

Ratification

The act of formally confirming or approving an agreement or act, making it officially valid.

Void

Refers to a legal declaration that an agreement or transaction is null and has no legal effect.