When the Purchase Price of an Asset Is Less Than

question 105

Multiple Choice

When the purchase price of an asset is less than its sale price, then there is a

• A) budget deficit.
• B) corporate income tax.
• C) capital gain.
• D) capital loss.

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Definitions:

Cost of Capital

The minimum return that an enterprise must earn on its investments for the value of the firm to remain unchanged, considered in project evaluations and pricing.

Equivalent Annual Annuity

A financial method used to evaluate projects with different lifespans by converting their values into equal annual payments.

Initial Outlay

The initial investment amount needed to fund a project or investment.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.