The Cost of Capital Used to Compute the Present Value

question 23

Multiple Choice

The cost of capital used to compute the present value of a project should be the rate that can be earned on:

• A)the overall market portfolio.
• B)the sponsoring firm's return on assets.
• C)a financial asset of comparable risk.
• D)a riskless asset with a similar life span.
• E)the sponsoring firm's return on equity.

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Definitions:

Tax Policy

The government's approach to taxation, involving the setting of tax rates and the determination of who bears the burden of taxes, aimed at funding public expenditures, influencing economic conditions, and redistributing income.

Physical Isolation

The state of being separated from other people or communities, often referring to geographic or natural barriers that limit access and communication.

System of Roads

An interconnected set of paths or routes designed for the transportation of goods, people, and services across areas.

American Identity

The sense of a collective character, traditions, and beliefs shared by citizens of the United States.