Which One of the Following Statements Concerning Net Present Value

question 133

Multiple Choice

Which one of the following statements concerning net present value (NPV) is correct?

• A) An investment should be accepted if, and only if, the NPV is exactly equal to zero.
• B) An investment should be accepted only if the NPV is equal to the initial cash flow.
• C) An investment should be accepted if the NPV is positive and rejected if it is negative.
• D) An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted.
• E) Any project that has positive cash flows for every time period after the initial investment should be accepted.

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Definitions:

Most People Believe

A phrase indicating a common or widespread opinion or perception among the general population.

Believe

To accept something as true, genuine, or real without absolute proof.

Appeal to Ignorance

A logical fallacy that claims a proposition is true because it has not yet been proven false, or vice versa.

Fallacy of Relevance

The basis of the argument is logically disconnected from, or not related to, the outcome.