If a Project Is Assigned a Required Rate of Return

question 91

Multiple Choice

If a project is assigned a required rate of return equal to zero,then:

• A) the timing of the project's cash flows has no bearing on the value of the project.
• B) the project will always be accepted.
• C) the project will always be rejected.
• D) whether the project is accepted or rejected will depend on the timing of the cash flows.
• E) the project can never add value for the shareholders.

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Definitions:

Price Levels

The mean value of present prices for all goods and services created within the economy.

Output Levels

Refers to the quantity of goods or services produced by a firm or economy over a certain period of time.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the higher market price they actually receive.

Economic Profit

Economic profit is the difference between total revenue and total costs, including both explicit and implicit costs, measuring the performance exceeding the opportunity costs of resources used.