Multiple Choice
Given the following set of cash flows: Year 0: \(-\$1,000\), Year 1: \$2,000\), Year 2: \(-\$1,500\), how many possible internal rates of return (IRRs) could exist for this investment?
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7. Receivables and Investments
Introduction to Investments in Securities
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In the context of investments in securities, which of the following best describes the cost incurred to prepare a machine or process for production?
A
Acquisition cost
B
Carrying amount
C
Market value
D
Setup cost
Verified step by step guidance1
Understand the context of the question: It is asking about the cost incurred to prepare a machine or process for production, which is related to investments in securities and production setup.
Review the definitions of the terms provided: Acquisition cost refers to the total cost of acquiring an asset, including purchase price and related expenses. Carrying amount is the value of an asset as recorded on the balance sheet, typically the original cost minus depreciation. Market value is the current price at which an asset can be sold. Setup cost refers specifically to the expenses incurred to prepare a machine or process for production.
Identify the term that directly relates to the preparation of a machine or process for production. Among the options, 'Setup cost' is the term that best describes this specific type of expense.
Recognize that setup costs are typically categorized as part of the initial costs associated with getting an asset ready for its intended use, and they are not included in acquisition cost, carrying amount, or market value.
Conclude that the correct answer is 'Setup cost,' as it directly addresses the cost incurred to prepare a machine or process for production.
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