For a Particular Investment Project, the Present Value of the Benefits

question 8

Multiple Choice

For a particular investment project, the present value of the benefits is exactly equal to the present value of the investment. Given this, which of the following statements is true?

• A) The net present value is positive
• B) The internal rate of return is less than the required rate of return
• C) The profitability index is less than one
• D) The project is acceptable

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Definitions:

Firms' Expectations

The outlook or anticipations of businesses regarding future economic conditions, sales, and profitability, which can influence their investment and production decisions.

Nominal Wage Rates

The amounts of money paid to workers before adjustments for inflation.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often reflected in a price index.

Real Wages

Wages adjusted for inflation, reflecting the true purchasing power of the earnings of the workforce.