A Firm Should Make an Investment If the Present Value

question 24

Multiple Choice

A firm should make an investment if the present value of the cash inflows is​

• A) ​less than zero
• B) ​greater than zero
• C) ​less than the cost of the investment
• D) ​greater than the cost of the investment

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Definitions:

Defaulted

refers to the failure to meet the legal obligations of a loan, such as not making the agreed-upon payments.

Deficiency

A shortfall or lack, especially of something essential or required.

Floating Lien

A security interest in proceeds, after-acquired property, or property purchased under a line of credit (or all three); a security interest in collateral that is retained even when the collateral changes in character, classification, or location.

Collateral

Assets pledged as security for the repayment of a loan, forfeitable in the event of a default.