If a Project Could Have a Bad Outcome

question 34

Multiple Choice

If a project could have a bad outcome:

• A) the discount rate should be increased.
• B) expected cash flows should be adjusted downward to reflect this possibility.
• C) the beta should be increased.
• D) the market risk premium should be revised downward.

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Definitions:

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production.

Marginal Revenue Product

The additional revenue a firm generates by employing one more unit of input, such as labor or capital.

Perfectly Competitive Market

A market characterized by a high level of competition, where no single buyer or seller can influence prices and products are homogeneous.

Marginal Productivity Principle

An economic principle stating that employers will pay a wage equal to the additional value generated by the last unit of labor hired.