Hedging, or Reducing Risk, Is the Same as Adding Value

question 28

True/False

Hedging, or reducing risk, is the same as adding value or return to the firm.

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Definitions:

Earnings Rate

Earnings rate refers to the percentage of return generated by an investment or the profitability of a company over a specified period.

Present Value Index

A ratio used to estimate the present value of an investment's benefits divided by the present value of its costs.

Net Cash Flow

The amount of cash generated or used by a company in a given period, calculated as cash inflows minus cash outflows.

Capital Investment

Funds spent by a company to purchase, maintain, or improve physical assets such as property, industrial buildings, or equipment.