As Long as the NPV of a Project Declines Smoothly

question 66

Multiple Choice

As long as the NPV of a project declines smoothly with increases in the discount rate,the project is acceptable if its:

• A) internal rate of return is positive.
• B) payback period is greater than one.
• C) rate of return exceeds the cost of capital.
• D) cash inflows equal the initial cost.

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Definitions:

Accounting Period

A specific time frame in which financial transactions are recorded and financial statements are prepared, commonly a fiscal quarter or year.

Voting Common Stock

Shares that give the shareholder the right to vote on corporate matters, such as electing the board of directors, at shareholder meetings.

Long-Term Investments

Assets that a company intends to hold for more than one year, such as stocks, bonds, real estate, and other securities.

Accounting Period

A specific period of time used for financial reporting purposes, which could be monthly, quarterly, or annually.