The Net Present Value Method of Capital Budgeting Analysis Does

question 24

Multiple Choice

The net present value method of capital budgeting analysis does all of the following except:

• A)incorporate risk into the analysis.
• B)consider all relevant cash flow information.
• C)discount all future cash flows to their current value.
• D)consider the initial cost of the project.
• E)provide a specific anticipated rate of return.

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Definitions:

Discounted

refers to a price that has been reduced from the original or list price, often to encourage sales or clear inventory.

Maturity Value

The amount payable to the holder of a financial instrument upon its maturity, including both the principal and the interest.

360-Day Year

A financial convention that simplifies the interest calculation by assuming a year has 360 days.

Maturity Date

The specified date on which the final payment of a loan or financial instrument must be paid, at which point the principal (and all remaining interest) is due to be paid.