Which One of the Following Changes Might Turn a Negative

question 101

Multiple Choice

Which one of the following changes might turn a negative NPV project into a positive NPV project?

• A) A decrease in the estimated annual sales
• B) An increase in the discount rate
• C) An increase in the initial investment
• D) A decrease in the fixed costs

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Definitions:

Trade Credit

Short-term financing provided by suppliers, allowing buyers to purchase goods or services on account without immediate cash payment.

Compensating Balances

A requirement by some banks for companies to maintain a minimum balance in their account as part of a loan agreement, effectively reducing the amount of usable cash.

Management Policy

Guidelines and rules set by an organization's management to direct operations and decision-making in alignment with the company's objectives.

Credit Policy

A credit policy is a set of guidelines that a company follows to determine credit limits, payment terms, and how to manage delinquent accounts for its customers.