Generally, Increases in Leverage Result in Increased Return and Risk

question 145

True/False

Generally, increases in leverage result in increased return and risk, whereas decreases in leverage result in decreased return and risk.

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Definitions:

Cash Payback Period

The period of time required for the cash inflows from a project or investment to repay the initial cash outlay.

Estimated Life

The expected duration over which an asset is likely to be operational and useful.

Obsolescence

Obsolescence refers to the process or condition by which an object, service, or practice loses its value or utility due to aging, technological advancements, or changes in market preferences.

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of cash flows given a specific rate of return.