The Cash Flows of a Project Should

question 26

Multiple Choice

The cash flows of a project should:

• A)be computed on a pretax basis.
• B)include all sunk costs and opportunity costs.
• C)include all incremental and opportunity costs.
• D)be applied to the year when the related expense or income is recognized by GAAP.
• E)include all financing costs related to new debt acquired to finance the project.

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Definitions:

Pairs Trading

A form of statistical arbitrage in which stocks are paired up based on underlying similarities and long/short positions are established to exploit any relative mispricing between each pair.

Statistical Arbitrage

A quantitative strategy that seeks to take advantage of price inefficiencies between related financial instruments by employing complex mathematical models.

Triangular Arbitrage

Triangular arbitrage is a risk-free trading strategy that takes advantage of a discrepancy between three foreign currencies in the foreign exchange market.

Carry

The profit or loss that arises from holding an investment over a period of time, considering both the cost of holding the investment and any returns it generates.