Which of the Following Statements Is Most Likely to Be

question 34

Multiple Choice

Which of the following statements is most likely to be correct for a project in which the NPV is negative when based on flows from net income?

• A) NPV may turn positive after adjusting for depreciation expense.
• B) NPV should be calculated with pretax cash flows.
• C) NPV has probably been overestimated.
• D) The project should be rejected or abandoned.

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Definitions:

Circular-Flow Diagram

An economic model that illustrates how money moves through society and the economy, from households to businesses and then back again.

Economy

An organized system of production, distribution, and consumption of goods and services within a geographical area.

Circular-Flow Diagram

A model that illustrates the movement of goods and services and money between households and businesses in the economy.

Markets

Places or systems in which parties engage in the exchange of goods, services, or information, driven by supply and demand.