Hal Is Considering Purchasing a Hybrid Automobile Because He Wants

question 118

Multiple Choice

Hal is considering purchasing a hybrid automobile because he wants better gas mileage and to help save the environment. However, he is concerned that the car might not perform as expected. Which type of risk is Hal considering?

• A) financial risk
• B) physical risk
• C) performance risk
• D) time risk
• E) social risk

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Definitions:

Internal Rate

The rate of return that makes the net present value (NPV) of all cash flows from a particular project equal to zero, often used in capital budgeting to assess potential investments.

Cash Flows

The entire sum of money flowing in and out of an enterprise, notably affecting its ability to meet short-term obligations.

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments.

Cost of Capital

The rate of return a firm needs to generate on its investment initiatives to preserve its market value and appeal to investors.