Which of the Following Results from a Negative Cash Flow

question 27

Multiple Choice

Which of the following results from a negative cash flow that occurs at the end of a project's life in addition to the initial investment in the project?

• A) Higher return from the investment in the project
• B) Lower project terminal value as compared to the cost of the project
• C) Negative net cash flow from the project
• D) More than one internal rate of return (IRR) of the project
• E) Shorter payback period for the project

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Definitions:

Alpha

Alpha is a financial metric indicating the performance of an investment relative to a benchmark index, representing the extra value that a portfolio manager adds or subtracts from a fund's return.

Expected Rate of Return

The projected percentage return on an investment over a given period, factoring in all known variables.

Beta

A measurement of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Capital Market Line

A theoretical line representing the risk versus return of the market of all investable assets, assuming risk-free borrowing and lending rates.