If a Project's Cash Flows Include Those Triggered Outside the Project's

question 113

Multiple Choice

If a project's cash flows include those triggered outside the project's incremental cash flows, it is likely that the:

• A)project interacts with other aspects of the firm.
• B)project must have high depreciation expense.
• C)opportunity cost of capital must be high.
• D)project will have a negative NPV.

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Definitions:

Double-Declining-Balance Method

A method of depreciation that provides for a declining periodic depreciation expense over the expected useful life of an asset.

Unamortized Premium

The portion of a bond's premium that has not yet been amortized or reduced over time through periodic charges to income.

Straight-Line Method

A method of calculating depreciation that allocates an equal amount of an asset's cost to each year of its useful life.

Maturity

The date on which a financial obligation or investment becomes due for payment.