What Is the Key Reason Why a Positive NPV Project

question 69

Multiple Choice

What is the key reason why a positive NPV project should be accepted?

• A)The project is expected to increase shareholder value.
• B)The present value of the expected cash flows equals the project's cost.
• C)The project will produce positive cash flows in the future.
• D)The project's payback will be positive during its life.
• E)The project's PI will be less than 1,which indicates acceptance.

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Definitions:

Rate Variance

The difference between the actual rate and a predetermined or standard rate.

Direct Labor-Hours

The aggregate of direct labor hours required for manufacturing a good or rendering a service.

Variable Overhead

Indirect production costs that vary with the level of output, including supplies and utilities necessary for production but not directly tied to specific products.

Efficiency Variance

The difference between the actual amount of resources used in production and the amount that should have been used, reflecting efficiency in resource usage.