If a Project's NPV Is Negative

question 60

Multiple Choice

If a project's NPV is negative:

• A)the project earns less than the cost of capital.
• B)the investment will not add value or contribute to shareholder wealth.
• C)the present value of expected cash outflows is greater than the present value of expected cash inflows.
• D)All of the above

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Definitions:

Financing Section

Part of the cash flow statement that records cash activities related to funding the company, such as obtaining loans or issuing stock.

Statement of Cash Flows

A financial statement summarizing the total cash earnings from a company's operational activities and investments, alongside the expenses and investments paid out over a specific time frame.

Accounting Equation

A fundamental principle of accounting stating that assets equal liabilities plus owners' equity (Assets = Liabilities + Equity).

Liabilities

Financial obligations or debts owed by a business or individual to external parties or entities.