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

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Definitions:

Cash Flows

The aggregate sum of cash entering and leaving a business, critically impacting its financial fluidity.

Financing Activities

Transactions and events that affect a company's long-term liabilities and equity, including issuing debt, repaying loans, and distributing dividends, as reported in the cash flow statement.

Investing Activities

Transactions that pertain to the acquisition and disposal of long-term assets and investments not included in cash equivalents.

Cash Flow Statement

A financial document summarizing the total cash received from a company's operational activities and external financial sources, alongside all expenditures on business operations and investments over a specific timeframe.