When the Present Value of the Cash Inflows Exceeds the Initial

question 60

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:

Copper

A reddish-brown, malleable, ductile metallic element with high electrical and thermal conductivity, used in many alloys and as electrical conductors.

Zinc

A metallic chemical element with the symbol Zn and atomic number 30, used in alloys and as a protective coating for iron and steel.

Factor Prices

The prices of inputs such as labor, capital, land, and raw materials used in the production of goods or services.

Production Function

An equation that describes the maximum output of a product that can be obtained from a given set of inputs.