A Firm Should Accept Projects with Positive Net Present Values

question 37

Multiple Choice

A firm should accept projects with positive net present values primarily because those projects will

• A)produce cash inflows that exceed the cash outflows.
• B)return the firm's initial cash outlay within 1 year.
• C)create value for the firm's current stockholders.
• D)produce only positive cash flows after the initial investment period.
• E)increase the current liquidity of the firm.

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Definitions:

Labor

The human effort, both physical and mental, used in the production process.

Capital

Financial assets or the financial value of assets, such as cash and securities; also, factories, machinery, and equipment used to produce goods or services.

Production Outcomes

Production outcomes refer to the results of the production process, quantified in terms of quantity, quality, and efficiency of the goods or services produced.

Stocks

Stocks represent shares of ownership in a company, giving shareholders a claim on part of the company's assets and earnings.