If Investors Are Less Certain About the Economic Outlook,they Will

question 117

Multiple Choice

If investors are less certain about the economic outlook,they will:

• A) reduce capital investments that are less irreversible.
• B) reduce capital investments that are more irreversible.
• C) raise capital investments that are less irreversible.
• D) raise capital investments that are more irreversible.

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Definitions:

Annual Cash Flows

The total amount of money that is transferred into and out of a business, project, or investment within a year.

Required Rate

The minimum return that investors expect to earn when they invest in a project, often used as the discount rate in capital budgeting.

Straight-line Depreciation

A method for dispersing the cost of a physical asset across its useful life in even annual allocations.

Discounted Payback

A capital budgeting method used to determine the profitability of an investment by calculating the time it takes for the present value of cash flows to cover the initial investment cost.