Should a Project Be Accepted If It Offers an Annual

question 59

Multiple Choice

Should a project be accepted if it offers an annual after-tax cash flow of $1,250,000 indefinitely, costs $10 million, is riskier than the firm's average projects, and the firm's WACC is 12.5%?

• A) Yes, since the project's NPV is positive.
• B) Yes, since a zero NPV indicates marginal acceptability.
• C) No, since the project's NPV is zero.
• D)No, since the project's NPV is negative.

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Definitions:

Categories

In Aristotle's philosophy, a way of classifying the world that includes ten distinct types such as substance, quantity, quality, and relation.

Mental Representations

Internal cognitive symbols, structures, or maps of the world that individuals use to understand and interact with their environment.

Subordinate-level

A specific, detailed level within a categorization hierarchy, often denoting a particular member of a larger group.

Basic-level

Refers to the most natural and preferred categorical level at which people classify and label objects, which balances specificity and generalization.