Which of the Following Is True About a Positive Net

question 80

Multiple Choice

Which of the following is true about a positive net present value?

• A)It measures the increase in the value of a firm resulting from an investment.
• B)It measures the rate at which the discount rate has decreased.
• C)It indicates that an investment is not profitable and hence should be rejected.
• D)It indicates that the cost of capital is less than the hurdle rate.

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Definitions:

Payback Period

The length of time required to recover the cost of an investment or project from its cash flows.

Initial Investment

The initial amount of money invested in a project or startup business.

Salvage Value

The projected salvage value of an asset at the termination of its useful life.

Net Present Value

A method used in capital budgeting to analyze the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows over a period of time.