Asked by Caroline Moore on Jun 11, 2024
Verified
Which of the following statements regarding NPV analysis is correct?
A) NPV calculations do not depend critically on cash flow projections.
B) NPV calculations are only as good as the information that goes into their calculation.
C) Negative NPV projects should be scrutinized to make sure there is a sound economic basis underlying them.
D) Positive NPV projects that have relatively low levels of fixed costs should be more heavily scrutinized than projects with relatively high levels of fixed costs.
E) NPV calculations will lead to correct decision-making even if the wrong discount rate is used.
NPV Calculations
A method used to evaluate the profitability of an investment by calculating the difference between the present values of cash inflows and outflows over a period of time.
Cash Flow Projections
Estimates of the amount of money expected to flow in and out of a business over a certain period.
Discount Rate
This is the rate used during discounted cash flow analysis for evaluating the present value of cash flows anticipated in the future.
- Gain insight into the core concepts of net present value (NPV) and learn the methodology for its calculation.
Verified Answer
Learning Objectives
- Gain insight into the core concepts of net present value (NPV) and learn the methodology for its calculation.
Related questions
A Publisher Is Deciding Whether or Not to Invest in ...
According to the Net Present Value (NPV)rule,managers Choose to Invest ...
Assume That You Own an Exhaustible Resource That Is Sold ...
When the Net Present Value Method Is Used, the Internal ...
Assuming That a Business Has a Project with Anticipated Positive ...