Which of the Following Statements Regarding NPV Analysis Is True

question 47

Multiple Choice

Which of the following statements regarding NPV analysis is true?

• A) Uncertainties increase as the dollar value of an investment increases
• B) The discount rate can be calculated with certainty if it is based on the weighted average cost of capital
• C) Managers should generally accept projects with an NPV greater than zero
• D) The timing of incremental revenues and costs is irrelevant in NPV analysis

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Definitions:

Marginal Product

The additional output a firm gains from employing one more unit of input, holding the levels of all other inputs constant.

Marginal Product

The increase in output that arises from an additional unit of input, holding all other inputs constant.

Factors of Production

Resources used in the production of goods and services, including labor, capital, entrepreneurship, and land.

Total Income

The aggregate amount of money earned by an individual or organization from all sources before taxes or deductions.