Which of the Following Projects Would You Feel Safest in Accepting

question 126

Multiple Choice

Which of the following projects would you feel safest in accepting? Assume the opportunity cost of capital to be 12 percent for each project.

• A)"A" has a small, but negative, NPV
• B)"B" has a positive NPV when discounted at 10 percent
• C)"C's" cost of capital exceeds its rate of return
• D)"D" has a zero NPV when discounted at 14 percent

Understand the role of the Internal Revenue Code in pension plan design and the taxation of contributions and benefits.

Comprehend the accounting treatment of unrecognized gains, losses, and net gain or loss amortization within pension expense.

Understand how underfunded and overfunded pension statuses are determined and reported.

Recognize the differences in risk assumption between defined benefit and defined contribution plans from the employer's perspective.

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Definitions:

Profit Increase

A rise in the difference between a business's revenues and its expenses, indicating improved financial performance.

Perfectly Competitive Firm

A company that operates in a market where there are many sellers and buyers, the product is homogeneous, and there are no barriers to entry or exit.

Breaks Even

A financial situation where total revenues are equal to total costs, resulting in no profit or loss.

Short Run

A period in economics where at least one factor of production is fixed, influencing the responsiveness of a company to changes in market demand.