A Positive NPV Forecast for a New Project Is Reliable

question 58

Multiple Choice

A positive NPV forecast for a new project is reliable only if it is based on

• A)forecasts of cash flows.
• B)Michael Porter's theories.
• C)identifiable sources of economic rents.
• D)results from Monte Carlo analysis.

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Definitions:

LIFO Reserve

The difference between the cost of inventory calculated using the Last In, First Out method and the First In, First Out method, reflecting the impact of inflation on inventory valuation.

Balance Sheet

A summary document detailing a firm's assets, liabilities, and equity held by shareholders at a certain moment.

Cumulative Effect

The total impact of one or more changes in accounting policies or corrections of errors made in previous years, reflected in the current year's financial statements.

Just-In-Time Inventory

A strategy that companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.