A Positive NPV Forecast for a New Project Is Reliable

question 58

Multiple Choice

A positive NPV forecast for a new project is reliable only if it is based on

• A)forecasts of cash flows.
• B)Michael Porter's theories.
• C)identifiable sources of economic rents.
• D)results from Monte Carlo analysis.

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Definitions:

Adjustments

Deductions from gross income that are made before calculating taxable income, leading to the calculation of the Adjusted Gross Income.

AMTI

Alternative Minimum Taxable Income, a measure used to ensure that individuals and corporations pay at least a minimum amount of tax.

Passive Activity

Economic endeavors in which a person is not actively involved on a regular, continuous, or substantial basis, often related to investment income.

Passive Losses

Financial losses occurring from income-generating activities in which the taxpayer does not materially participate, often subject to specific tax rules.