Which of the Following Transactions Does Not Meet the Definition

question 12

Multiple Choice

Which of the following transactions does not meet the definition of an asset?

• A)Deposit for purchase of equipment.
• B)Commitment to purchase equipment.
• C)Finance leased equipment.
• D)Purchase of equipment on credit.
• E)None of the given answers.

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Definitions:

Cost of Capital

The rate of return a company must offer investors to finance its assets, essentially a benchmark that a project must meet or exceed for it to be considered viable.

NPV Profiles

NPV profiles graphically represent the relationship between the net present value of investments and various discount rates, helping to visualize investment risk and potential returns.

Mutually Exclusive

Projects that cannot be performed at the same time. A company could choose either Project 1 or Project 2, or it can reject both, but it cannot accept both projects.

IRR

Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It is used to evaluate the attractiveness of an investment or project.