When the Present Value of the Cash Inflows Exceeds the Initial

question 104

Multiple Choice

When the present value of the cash inflows exceeds the initial cost of a project,then the project should be:

• A) accepted because the internal rate of return is positive.
• B) accepted because the profitability index is greater than 1.
• C) accepted because the profitability index is negative.
• D) rejected because the internal rate of return is negative.
• E) rejected because the net present value is negativE.

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Definitions:

Nominal Wage Rates

The amounts of money paid to workers before adjustments for inflation.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often reflected in a price index.

Real Wages

Wages adjusted for inflation, reflecting the true purchasing power of the earnings of the workforce.

Nominal Wage

The amount of money paid to employees without adjustment for inflation or purchasing power.