In Capital Budgeting,the Appropriate Decision Rule for an Average-Risk Project

question 91

Multiple Choice

In capital budgeting,the appropriate decision rule for an average-risk project is to accept if the ________ is greater than the WACC.

• A)NPV
• B)IRR
• C)cost of equity
• D)cost of debt

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Definitions:

Incremental Value

The additional or extra value generated by undertaking a new project, making an investment, or initiating a new action.

Equity-Financed

A method of raising capital through the sale of shares in the company, leading to shareholder ownership.

Firm A

A placeholder name often used to refer to a specific company in examples or case studies.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows.