Net Present Value (NPV) Is Interpreted Using the Following Decision

question 26

Multiple Choice

Net present value (NPV) is interpreted using the following decision rule: The investor will purchase the property as long as the NPV is:

• A) greater than zero
• B) equal to zero
• C) less than zero
• D) equal to the opportunity cost of investment

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Definitions:

Marginal Cost

The increase in cost that comes from making one more unit of a product or service.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to a balance in the market.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply equals demand.

Collusion

A secret or illegal cooperation or conspiracy, especially between parties to cheat or deceive others, commonly in the context of firms agreeing on prices or market shares.