The Value Test That a Business Plan Must Pass to Attract

question 100

Multiple Choice

The value test that a business plan must pass to attract financing from lenders and investors involves proving ________.

• A)that the company can gain a competitive advantage over its key competitors
• B)that the business venture will provide lenders and investors a high probability of repayment or an attractive rate of return
• C)that a market for the company's product or service actually does exist and that the company can actually build it for the cost estimates included in the plan
• D)that the industry in which the business will compete is growing faster than the overall economy and has room for more competitors

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Definitions:

Useful Life

The estimated duration of time over which an asset is expected to be functional and contribute to a company's operations.

Average Rate of Return

A financial metric that assesses an investment's profitability by dividing the annual average profit by the initial cost of investment.

Capital Investment Proposals

Proposals for projects or investments that require significant amounts of capital, analyzed for potential return and risk.

Cash Payback Methods

A capital budgeting technique that estimates the time needed for an investment to generate cash flows to recover its initial cost.