If the NPV of a Project Is Less Than Zero

question 27

Multiple Choice

If the NPV of a project is less than zero, then its profitability index is:

• A)less than 1.
• B)equal to1.
• C)greater than 1.
• D)equal to 0.

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Definitions:

Purchase Discounts Lost

The extra cost incurred by a company for not taking advantage of the discounts offered by suppliers for early payments.

Catalog Price

The price of an item as listed in a catalog, which may be subject to discounts based on various sales promotion strategies.

Perpetual Inventory System

An accounting method where goods are recorded as sold immediately through the use of computer systems, providing a continuous record of inventory.

Gross Price Method

An accounting practice where inventory and purchases are recorded at their full cost without deducting trade discounts.