An Analysis of a Proposal by the Net Present Value

question 148

Multiple Choice

An analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

• A) The proposal is desirable, and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.
• B) The proposal is desirable, and the rate of return expected from the proposal is less than the minimum rate used for the analysis.
• C) The proposal is undesirable, and the rate of return expected from the proposal is less than the minimum rate used for the analysis.
• D) The proposal is undesirable, and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.

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Definitions:

Price Support Payments

are subsidies or financial assistance provided by the government to farmers or producers to maintain the market price of an agricultural product above its market equilibrium.

Minimum Wage Law

Minimum Wage Law is legislation that sets the lowest hourly rate that can be paid to workers, aiming to ensure a minimum standard of living for employees.

Price Floor

A government or group-imposed limit on how low a price can be charged for a product, usually above the equilibrium price, to protect producers.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or commodity, intended to protect consumers from high prices.