You Are Analyzing a Project That Is Equivalent to Borrowing

question 15

Multiple Choice

You are analyzing a project that is equivalent to borrowing money.This project's:

• A) NPV graph rises as discount rates decrease.
• B) initial cash flow is an outflow of funds.
• C) value increases when the cost of capital increases.
• D) acceptance requires its IRR to exceed the cost of capital.

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Definitions:

Rational Basis Review

A standard of review used by courts to evaluate the constitutionality of a law or government action, requiring that the law be rationally related to a legitimate governmental interest.

Establishment Clause

A provision of the First Amendment to the U.S. Constitution that prohibits the government from establishing an official religion, endorsing all religions, or favoring one religion over others.

Free Exercise Clause

A provision in the First Amendment of the US Constitution that protects individuals’ rights to practice their religion freely, without government interference.

Full Faith and Credit

Full faith and credit refers to a clause in the United States Constitution requiring each state to recognize the public acts, records, and judicial proceedings of every other state.