A Project with a Higher Than Average Risk Offers an Expected

question 57

Multiple Choice

A project with a higher than average risk offers an expected return of 18%.Which statement is correct if the company's opportunity cost of capital is 12% and the project's opportunity cost of capital is 15%?

• A)Project NPV is positive; it should be accepted.
• B)Project NPV is negative; it should be rejected.
• C)Project NPV is positive but it should be rejected.
• D)Project NPV is negative but it should be accepted.

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Definitions:

Necessities

Necessities are basic needs or essential items required for living, such as food, clothing, and shelter.

Ability-To-Pay Principle

A taxation principle that suggests taxes should be levied according to an individual or entity's ability to afford them, often implying higher taxes for those with higher income.

Pigouvian Subsidies

Financial incentives given by the government to encourage activities that have positive external effects on society.

Government Transfers

Payments by the government to individuals for which no good or service is provided in return.