Results from the Net Present Value (NPV) Method and the Internal

question 105

Multiple Choice

Results from the net present value (NPV) method and the internal rate of return (IRR) method may differ between projects if the projects differ in all the following except:

• A) Required initial investment.
• B) Cash-flow pattern.
• C) Cost of capital (i.e., discount rate).
• D) Length of useful life of the two projects.
• E) Book (accounting) rate of return on the two projects.

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Definitions:

Demand Curve

A graph demonstrating the relationship between the price of a good or service and the quantity demanded for it at those prices, typically showing a downward slope from left to right.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing and able to purchase at different price levels.

Marginal Cost

The elevation in full costs that come from generating an additional unit of a good or service.

Average Cost

The total cost divided by the number of goods produced, representing the per unit cost of production.