A Project's Opportunity Cost of Capital Is

question 2

Multiple Choice

A project's opportunity cost of capital is:

• A) the return that shareholders could expect to earn by investing in the financial markets.
• B) the return earned by investing in the project.
• C) equal to the average return on all company projects.
• D) designed to be less than the project's IRR.

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Definitions:

Equity Account

An account that represents the owner's or shareholders' residual interest in the assets of a company after deducting liabilities.

Common Stock

This represents ownership shares in a corporation, providing voting rights and entitling the holder to a share of the company's success through dividends and capital appreciation.

Stockholder

An individual or entity that owns shares in a corporation, giving them ownership interest.

Dividends Account

An account used in bookkeeping that records the dividends paid out to shareholders from a corporation's earnings.