If the Level of Sales Is Less Than That Calculated

question 41

Multiple Choice

If the level of sales is less than that calculated as the NPV break-even level,then the:

• A) project will break even in accounting terms.
• B) project's EVA will be greater than zero but less than the opportunity cost of capital.
• C) project will have a negative EVA.
• D) discount rate should be reduced.

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Definitions:

Joint Venture Liabilities

The financial obligations that are incurred jointly by partners in a venture, which must be settled together.

Line-by-Line Method

A consolidation technique where the parent company combines its subsidiary's assets, liabilities, income, and expenses line by line into its own financial statements.

One-Line Method

An accounting technique used for combining the financial statement of a parent company and its subsidiary by reporting the investment in a single line.