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A Firm Should Never Undertake an Investment If Accepting the Project

question 138

True/False

A firm should never undertake an investment if accepting the project would cause an increase in the firm's required rate of return.


Definitions:

Section 1231

A tax provision that allows for the favorable tax treatment of gains on the sale or exchange of certain types of property used in a business.

Trade or Business

An activity carried out for the purpose of earning income or profit, involving regularity and continuity in operations.

Security

A financial instrument representing an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

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