A Negative Net Present Value Indicates That the

question 14

Multiple Choice

A negative net present value indicates that the

• A) project is acceptable.
• B) wrong discount rate was used.
• C) project's annual rate of return exceeds the discount rate.
• D) present value of the cash inflows was less than the present value of the cash out flows.

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Definitions:

Salvage Value

The projected sell-on value of a property when it reaches the end of its operational lifespan.

Internal Rate

Often referred to as Internal Rate of Return (IRR), it is the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Payback Period

The duration required for an investment to produce a sum of money or cash value equal to the investment's cost.

Simple Rate

An interest calculation method where interest is calculated on the principal amount only, without compounding.