If the Net Present Value of a Proposed Investment Is

question 43

Multiple Choice

If the net present value of a proposed investment is negative,

• A) the cost of the investment is less than the present value of the future cash flows.
• B) the investment earns the required rate of return.
• C) the present value of the future cash flows would be unaffected by the proposed investment.
• D) the firm should not make the investment, since the present value of the future cash flows is less than the cost of the investment.

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Definitions:

Cerebral Cortex

The outer layer of the brain that is responsible for complex cognitive processes, including thought, memory, awareness, and consciousness.

Biological Evolution

The process by which different kinds of living organisms are thought to have developed and diversified from earlier forms during the history of the earth.

Low Base Rate Fallacy

The tendency to ignore the base rate (i.e., the prevalence of an event or characteristic within a given population) when making judgments of probabilities, leading to inaccurate assessments.

Rarely Exercised Option

An option or choice that is available but seldom used or selected by people.