Joan Osborne Is Evaluating a Potential Capital Investment

question 45

Multiple Choice

Joan Osborne is evaluating a potential capital investment.She has calculated the net present value using a minimum rate of return of 10%.Using this rate,the net present value is negative.What does this tell her about the rate of return expected for the project?

• A) If the net present value is negative;the expected rate of return for the project is greater than the 10% minimum or required rate of return.
• B) If the net present value is negative;the expected rate of return for the project is less than the 10% minimum or required rate of return.
• C) If the net present value is negative;the expected rate of return for the project is equal to the 10% minimum or required rate of return.
• D) None of the other answers are correct.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total benefits to society from trading goods and services.

Tariffs

Taxes imposed by a government on imported goods and services to control trade volumes, protect domestic industries, or generate revenue.

Quotas

Limits set by governments on the quantity of a good that can be imported or exported within a certain time period to regulate trade.

Sugar

A sweet crystalline substance obtained from various plants, primarily sugar cane and sugar beet, used as a sweetener in food and drink.