Incorporating Flotation Costs into the Analysis of a Project Will

question 64

Multiple Choice

Incorporating flotation costs into the analysis of a project will:

• A) cause the project to be improperly evaluated.
• B) increase the net present value of the project.
• C) increase the project's rate of return.
• D) increase the initial cash outflow of the project.
• E) have no effect on the present value of the project.

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Definitions:

Conditionally Liable

Refers to a legal obligation that becomes enforceable only upon the occurrence of a specified condition.

Stated Amount

The specified value or sum agreed upon in a contract for the provision of goods, services, or coverage.

Negotiable Instrument

A formal paper assuring the disbursement of a specified amount of funds, which could be paid either immediately when requested or at a scheduled time, with the document identifying the payor.

Demand Instrument

A type of draft that allows the payee to demand payment at any time from a holder.