Some Commentators Have Suggested That Enron Would Not Have Collapsed

question 3

Multiple Choice

Some commentators have suggested that Enron would not have collapsed if it:

• A) Had enacted a Code of Conduct
• B) Had enacted a standard Code of Conduct rather than the weak one that it in fact had
• C) Had carefully complied with all of the provisions of the Sarbanes-Oxley Act
• D) Had not unduly focused on short-term stock performance

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Definitions:

Cost Of Capital

The average rate of return a company must pay to its long-term creditors and shareholders for the use of their funds.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Initial Investment

Initial investment refers to the amount of money initially laid out for an investment project or venture.

Profitability Index

The present value of a project’s cash inflows divided by the investment required.