If a Project's Expected Rate of Return Exceeds Its Opportunity

question 88

Multiple Choice

If a Project's expected rate of return exceeds its opportunity cost of capital, one would expect:

• A)the profitability index to exceed 1.0.
• B)the opportunity cost of capital to be too low.
• C)the IRR to exceed the opportunity cost of capital.
• D)the NPV to be zero.

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Definitions:

Merit Pay

Pay increase given to employees based on their job performance, as a reward for their contributions towards organizational goals.

Indirect Pay

Compensation that includes benefits not given directly as cash, such as health insurance, retirement plans, and paid time off.

Income Tax Treatment

Refers to the way tax laws are applied to an individual's or entity's income, including deductions, exemptions, and the calculation of taxes owed.

Direct Pay

The monetary compensation received by employees for their work, including wages, salaries, bonuses, and commissions.