A Negative Net Present Value Indicates That

question 118

Multiple Choice

A negative net present value indicates that:

• A) A project's cash inflows must be less than the project's initial cost.
• B) A project is acceptable.
• C) A project's initial cash outflow is greater than the present value of the project's cash inflows.
• D) The discount rate is greater than the current market rate of return.
• E) The discount rate applied to the project is less than the project's internal rate of return.

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Definitions:

Pretax Income

Earnings of a company before any tax is applied, calculated by deducting all operating expenses, including cost of goods sold and interest, from revenues.

Curvilinear Costs

Costs that change with the level of output but at a non-constant rate, displaying a curved relationship between cost and output.

Nonconstant Rate

Refers to a rate that changes over time, as opposed to a constant or fixed rate which remains the same.

Mixed Cost

Expenses that contain both fixed and variable components, changing in total with the level of activity but not proportionately.