Which One of the Following Statements Concerning Net Present Value

question 42

Multiple Choice

Which one of the following statements concerning net present value (NPV) is correct?

• A) An investment should be accepted if, and only if, the NPV is exactly equal to zero.
• B) An investment should be accepted only if the NPV is equal to the initial cash flow.
• C) An investment should be accepted if the NPV is positive and rejected if it is negative.
• D) An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted.
• E) Any project that has positive cash flows for every time period after the initial investment should be accepted.

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Definitions:

Contract

A legally binding agreement between two or more parties, typically entailing a promise or set of promises enforceable by law.

Unconscionable Contract

An agreement that is so unfairly one-sided that it is considered oppressive or shocks the conscience of the court.

Article 2A

Pertains to the leasing of goods under the Uniform Commercial Code (UCC) in the United States.

Sotheby's Representative

An individual who acts on behalf of Sotheby's, the international auction house, in dealings with clients and the coordination of auctions and sales.