Net Present Value Is a Highly Valued Decision-Making Tool Because

question 276

Multiple Choice

Net present value is a highly valued decision-making tool because:

• A) It only includes information which is known with certainty.
• B) It is computed using the internal rate of return.
• C) It can be applied to either independent or mutually exclusive projects.
• D) It reveals the rate of return which investors will earn on average over the lifetime of the project.
• E) It is affected by the magnitude rather than the timing of a project's cash flows.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, typically expressed on an annual basis, serving as a key parameter in financial transactions.

Present Value

The present value of a future amount of money or series of cash flows, considering a particular return rate.

Interest Rate

The percentage of the principal charged by a lender for the use of its money or the rate at which interest is paid by a borrower for the use of money.

Consumes

The action of using up a good or service, typically resulting in a decrease in available quantity.