If a Project's Expected Rate of Return Exceeds Its Opportunity

question 35

Multiple Choice

If a project's expected rate of return exceeds its opportunity cost of capital,one would expect:

• A) the profitability index to be negative.
• B) the opportunity cost of capital to be too low.
• C) the project to have a positive NPV.
• D) the NPV to be zero.

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Definitions:

Capital Investment

Funds spent by a business to acquire or upgrade physical assets such as property, industrial buildings or equipment.

ESOPs

Employee Stock Ownership Plans, which are employee benefit plans giving workers ownership interest in the company, usually as a form of retirement benefit.

Employee Representation

The practice of workers electing representatives to negotiate with management on their behalf, often in the context of labor relations.

Financialization

The process by which financial markets, instruments, and institutions gain greater influence over economic policy and economic outcomes.