The Total NPV of a New Plant Is Equal to the NPV

question 42

True/False

The total NPV of a new plant is equal to the NPV of the new plant plus the change in the present value of existing plants due to the impact of the new plant.

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Definitions:

Cost Center

A division within an organization that does not directly add to profit but still incurs costs, such as a research and development department.

Maintenance Department

A division within an organization responsible for the upkeep, repair, and servicing of equipment and facilities.

Direct Expense

Expenses that can be directly attributed to the production of goods or services, such as raw materials and labor costs.

Profit Center

A profit center is a branch or division of a company that is responsible for generating its own revenue and profit, evaluated independently.