Thinking in Terms of the Goal of Wealth Maximization,a Project

question 24

Multiple Choice

Thinking in terms of the goal of wealth maximization,a project breaks even for shareholders,meaning that it neither creates nor destroys value,if ________.

• A)its NPV equals 0
• B)its IRR equals 0
• C)its net profit after taxes equals 0
• D)its payback period is one year or less

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Definitions:

Transactions Need

encapsulates the necessity for exchanges or trades to occur within an economy or market for goods, services, financial assets, or currencies.

Zero-Balance Account

A bank account in which the balance is maintained at zero by automatically transferring funds from a master account.

Compensating Balance

A compensating balance is a minimum balance that must be maintained in a bank account, required by some banks in order for their customers to obtain or maintain a loan.

Master Account

A central account that holds funds or securities, often used by institutions to manage multiple sub-accounts.