Which One of the Following Statements Is Correct

question 78

Multiple Choice

Which one of the following statements is correct?

• A)The subjective approach assesses the risks of each project and assigns an adjustment factor that is unique just for that project.
• B)Overall, a firm makes better decisions when it uses the subjective approach than when it uses its WACC as the discount rate for all projects.
• C)Firms will correctly accept or reject every project if they adopt the subjective approach.
• D)Mandatory projects should only be accepted if they produce a positive NPV when the firm's WACC is used as the discount rate.
• E)The pure play approach should only be used with low-risk projects.

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Definitions:

AGI

Adjusted Gross Income; income calculation used to determine how much of your income is taxable after certain adjustments are made.

Credit for the Elderly

A tax credit available for individuals aged 65 or older, or those under 65 who are retired on permanent and total disability and who meet other qualifications.

Disabled

This term refers to individuals who have a condition, either physical or mental, that substantially limits one or more major life activities.

Nontaxable Social Security

Social Security benefits that are not subject to federal income tax under certain income conditions.