Financing for a large construction project was provided by a group of banks. When the money was gone before the project was completed, the banks approved additional loans. Now, with funds used up again and completion still not at hand, the banks refuse to extend further loans, although without those loans, the project is doomed. Which of the following, if true, best explains why the bank’s current reaction is different from their reaction in the previous instance of depletion of funds?

Question

Examsnet · Accepted Answer

Correct Answer is : The banks have reassessed the income potential of the completed project and have concluded that total income generable would be less than total interest due on the old plus the needed new loans.

GMAT Verbal Reasoning Practice Test 5