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:

Reciprocal Approach

A method used in managerial accounting to allocate costs among departments or units when there are mutual services provided between them.

Support Department Costs

Costs incurred by departments that do not directly produce goods or services but provide support to other departments that do.

Large Support Departments

Essential organizational units that provide services and support to the core functions of a business but do not directly contribute to profit generation.

Overhead Cost Drivers

Factors that significantly influence the incurrence of overhead costs, helping in the allocation of overheads to products or services based on their usage or consumption.