A Project with an IRR That Is Less Than the Opportunity

question 93

Multiple Choice

A project with an IRR that is less than the opportunity cost of capital should be:

• A) accepted for all project types.
• B) accepted for all lending projects.
• C) accepted for all borrowing projects.
• D)rejected for all projects.

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, particularly in terms of liquidity and financial stability.

Capital Budgeting

The process businesses use to evaluate and select long-term investments, such as new machinery, replacement machinery, new plants, new products, and research development projects.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, dividing its cost by the number of years it is expected to be useful.

Income Tax Expense

The cost incurred by individuals or corporations due to income taxes, representing a financial charge for earning taxable income.