Financing Decisions Differ from Investment Decisions for Which of the Following

question 52

Multiple Choice

Financing decisions differ from investment decisions for which of the following reasons?
I.you cannot use NPV to evaluate financing decisions;
II.markets for financial assets are more active than for real assets;
III.it is easier to find financing decisions with positive NPV than to find investment decisions with positive NPV

• A)I only
• B)II only
• C)III only
• D)I and III only

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Definitions:

Planning Budget

A budget prepared for a future period that outlines expected revenues, expenses, and other financial activities to guide decision-making.

Equipment Depreciation

This refers to the accounting process of allocating the cost of physical assets over their useful lives to account for the loss in value.

Spending Variance

The difference between the actual expenditure and the budgeted amount.

Machine-Hours

A measure used to allocate manufacturing overhead costs to products based on the number of hours machines are used in the production process.