Of the Four Options Listed Below and Encountered in Project

question 62

Multiple Choice

Of the four options listed below and encountered in project evaluation, which one is most likely to make a project seem less attractive?

• A)underestimating negative cash flows
• B)overestimating positive cash flows
• C)using a higher cost of capital
• D)ignoring the time value of money

---

Definitions:

Socially Efficient Quantity

The level of production or consumption of a good or service that results in the optimal allocation of resources, considering both private and social costs and benefits.

Profit-Maximizing Quantity

The level of production at which a company achieves its highest profit, where marginal cost equals marginal revenue.

Average Total Cost

The total cost divided by the quantity of output produced; it is the sum of average fixed costs and average variable costs.

Marginal Cost

The extra cost incurred when one more unit of a product or service is produced.