The Net Present Value of a Project Is The

question 3

Multiple Choice

The net present value of a project is the:

• A) sum of the project's cash flow from each year.
• B) project's total cash flow divided by the current interest rate.
• C) sum of the present value of the project's cash flow from each year.
• D) project's total cash flow, less its start-up costs.

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Definitions:

Giffen Goods

A type of product that paradoxically experiences increased demand as its price rises, seemingly contrary to the basic law of demand due to the effect on consumption of essential goods.

Inferior Goods

Products whose demand decreases as the income of consumers increases, due to the preference for higher-quality substitutes.

Income Effect

The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.

Optimal Choice

The best possible decision or selection, based on a specific set of criteria, that maximizes efficiency, benefit, or utility.