A Project Assessment Shows a Positive NPV Even After Allowing

question 12

Multiple Choice

A project assessment shows a positive NPV even after allowing for real option value. Which one of the following options best describes what action management should take?

• A) Accept the project without further study
• B) Reject the project and carry out further investigation of it
• C) Reject the project
• D) Accept the project and carry out further investigation

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Definitions:

Direct Labor Incurred

The cost of wages paid to workers directly involved in the production of goods or services.

Raw Materials

Raw materials are the basic, unprocessed inputs that are used in the manufacturing process to produce finished goods.

Factory Overhead Rate

A rate used to assign or allocate factory overhead costs to individual units of production, usually based on a standard measure such as labor hours or machine hours.

Direct Labor Cost

The total of all wages paid to employees who are directly involved in the production of goods or services.