If a New Project Generates a Positive Residual Income,the

question 2

Multiple Choice

If a new project generates a positive residual income,the

• A)project's return on investment is less than the target rate.
• B)project's return on investment is greater than the target rate.
• C)project's return on investment is equal to the target rate.
• D)relationship between the project's return on investment and the target rate cannot necessarily be determineD.

---

Definitions:

Annuity

An investment vehicle that provides a consistent series of payments to a person, mainly serving as a source of income for those who have retired.

Compound Interest

Interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Present Value

The assessed present-day value of money to be received in the future or a pattern of cash inflows, factoring in an established rate of return.

Effective Rate

is the actual interest rate that an investment earns or a loan incurs, including the effects of compounding over a given period.