The NPV of an Investment Proposal Becomes Negative as a Result

question 48

Multiple Choice

The NPV of an investment proposal becomes negative as a result of allocating a portion of the corporation president's salary. It is most likely the case that:

• A) the project should be accepted.
• B) rejecting the project is the correct decision.
• C) the allocation should be postponed until the project is accepted.
• D)the salary should be considered an opportunity cost of the project.

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Definitions:

Operating Activity

Operating activity involves the primary functions of a business that relate to its provision of goods and services to the market.

Expenses

Assets used up or services consumed in the process of generating revenues.

Retail Business

A business that sells goods or services directly to consumers for personal or household use.

Service Business

is a type of business that provides intangible products or services to consumers instead of physical goods.