If economic conditions become less favorable, then:
A) expected cash flows on various projects will increase.
B) more proposed projects will have expected returns greater than the hurdle rate.
C) there would be additional acceptable business projects.
D) there would be a decreased demand by business for loanable funds.

Question

Quizplus · Accepted Answer

If economic conditions become less favorable, businesses may reduce their demand for loanable funds, as they may be less willing to invest in new projects. This could lead to a situation where there are fewer acceptable business projects and fewer projects with expected returns greater than the hurdle rate. This could also affect expected cash flows on various projects, which may decrease as economic conditions worsen.

If Economic Conditions Become Less Favorable, Then