The Primary Reason That Company Projects with Positive Net Present

question 84

Multiple Choice

The primary reason that company projects with positive net present values are considered acceptable is that:

• A)they create value for the owners of the firm.
• B)the project's rate of return exceeds the rate of inflation.
• C)they return the initial cash outlay within three years or less.
• D)the required cash inflows exceed the actual cash inflows.
• E)the investment's cost exceeds the present value of the cash inflows.

Analyze the impact of price discrimination on monopolist's profits and consumer surplus.

Distinguish between different market structures including perfect competition, monopolistic competition, oligopoly, and monopoly.

Identify the effects of barriers to entry on market structures and competition.

Understand the relationship between economies of scale, natural monopolies, and market control.

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Definitions:

NPV

Net Present Value, a calculation to determine the value of a projected investment by subtracting the present value of cash outflows from the present value of cash inflows.

Equivalent Annual Annuity

A financial concept used to evaluate the annual return of an investment over its lifespan, making it easier to compare different investments.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds.

Cash Flows

The comprehensive total of monetary transactions entering and leaving a business, chiefly affecting its cash position.