CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

A large corporation accepts a project that generates no revenue and has a negative net present value. The project most likely is classified in which of the following categories?
A. Replacement project
B. Expansion project
C. Regulatory or environmental project
Explanation: Regulatory, safety, and environmental projects are often mandated by governmental agencies. They may generate no revenue and might not be undertaken by a company maximizing its own private interests. For example, a corporation may be required to install equipment to meet a regulatory standard, and the cost of satisfying the standard is born by the corporation. In this case, the corporation selects the lowest cost alternative that meets the requirement (i.e., the alternative with the least negative net present value).

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