When Calculating the NPV of a Project, Which of the Following

question 46

Multiple Choice

When calculating the NPV of a project, which of the following should not be considered?

• A)the cost of a new computer network that will be used by all the divisions of the firm.
• B)the cost of an advertising campaign for a new project since the campaign should be evaluated as an independent project.
• C)any cost that the project may impose on a division other than the division that will be undertaking the project.
• D)All of the above should be considered when calculating the NPV of a project.

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Definitions:

Compounded Monthly

In finance, it refers to the process of computing interest on an investment or loan on a monthly basis, with each month's interest being added to the principal for the calculation of subsequent interest.

Interest

The cost of borrowing money or the payment received for saving or investing money, typically expressed as an annual percentage of the principal.

Nominal Rate

The interest rate stated on a financial product, not adjusted for inflation.

Effective Rate

The actual interest rate an investor earns or pays on an investment or loan, taking into account the effects of compounding.