Valerta Company Used the Net Present Value Method and Determined

question 155

Multiple Choice

Valerta Company used the net present value method and determined that project 34 had a zero net present value. What does this tell management about the project?

• A) The return from this project is equal to the cost of capital.
• B) The project guarantees company profitability.
• C) The project's cash inflows will equal its cash outflows.
• D) The project earns the company's desired minimum rate of return.

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Definitions:

Net Markups

The amount added to the cost price of goods to cover overhead and profit, minus any discounts or allowances.

Retail Inventory Method

A method used in accounting to estimate the value of a store's merchandise based on the retail price of the inventory.

Net Markup

The percentage increase on the cost price of a product to arrive at its selling price, accounting for profit.

Price Change

Refers to the fluctuation in the selling price of goods and services over time, which can impact the revenues, expenses, and ultimately the profits of a business.