If a Project's Net Benefit Computed on a Present Value

question 42

Multiple Choice

If a project's net benefit computed on a present value basis-that is, NPV-is positive, then:

• A) its internal rate of return is equal to the required rate of return.
• B) it is considered a risk-free project.
• C) it is considered an acceptable investment.
• D) the required rate of return is not attainable.
• E) its payback period is more than the maximum cost-recovery time established by the firm.

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Definitions:

Revenue

The sum of money earned from the sale of products or services central to the business's main activities.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future, recorded as assets on a balance sheet and expensed over time as the goods or services are consumed.

Costs Paid

Expenses that a company has incurred and settled through payment.

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is actually received or paid out, ignoring receivables and payables.