If a Project Is Assigned a Required Rate of Return

question 6

Multiple Choice

If a project is assigned a required rate of return of zero,then:

• A)the timing of the project's cash flows has no bearing on the value of the project.
• B)the project will always be accepted.
• C)the project will always be rejected.
• D)whether the project is accepted or rejected will depend on the timing of the cash flows.
• E)the project can never add value for the shareholders.

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Definitions:

Overhead Applied

An accounting method that allocates overhead costs to specific cost objects, such as products or jobs, based on a pre-determined rate or base.

Job Order Costing System

An accounting system used to assign costs to specific jobs or orders, tracking the direct materials, direct labor, and manufacturing overhead per job.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor costs. These costs include utilities, depreciation of factory equipment, and salaries of maintenance personnel.

Direct Materials

Direct materials are raw materials that are directly incorporated into a final product and are directly attributable to the product being manufactured.