When a Company Uses Economic Profit as a Performance Metric,managers

question 31

Multiple Choice

When a company uses economic profit as a performance metric,managers have an incentive to invest only in projects ________.

• A) earning less than the return on investment of the segment or division
• B) earning more than the return on investment of the segment or division
• C) earning more than the cost of capital of the segment or division
• D) earning less than the cost of capital of the segment or division

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Definitions:

Flexibility

The ability to adapt to changes, make decisions quickly and adjust to new conditions or environments.

Futures Contracts

Agreements to buy or sell a particular commodity or financial instrument at a predetermined future date and price.

Copper

A chemical element with the symbol Cu and atomic number 29, known for its high thermal and electrical conductivity, used in electrical equipment, construction, and various alloys.

Maturity Date

The date on which the principal amount of a loan, bond, or other financial instrument becomes due and is to be paid in full.