If the Level of Sales Is Less Than That Calculated

question 126

Multiple Choice

If the level of sales is less than that calculated as the NPV break-even level, then the:

• A)Project will break even only in accounting terms
• B)Project's NPV will be greater than zero but less than the opportunity cost of capital
• C)Project will have a negative NPV
• D)Discount rate should be reduced

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Definitions:

Investing Activities

Transactions and events that relate to the investment of the company’s cash, including acquisitions and disposals of long-term assets and other investments not included in cash equivalents.

Cash Flows

The net amount of cash being transferred into and out of a business.

Operating Activities

The principal revenue-producing activities of the entity and other activities that are not investing or financing activities.

Bad Debts Expense

Represents the recognition of accounts receivable that are not expected to be collected.