An Analysis of a Proposal by the Net Present Value

question 78

Multiple Choice

An analysis of a proposal by the net present value method indicated that the present value exceeded the amount to be invested.Which of the following statements best describes the results of this analysis?

• A)The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.
• B)The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.
• C)The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.
• D)The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.

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Definitions:

Nominal Exchange Rate

The rate at which currencies are traded in the foreign exchange market, not considering differences in price levels between countries.

Domestic Price

The price of a good or service within a specific country, distinct from its price in international markets.

Depreciate

The process by which an asset's value decreases over time due to use, wear and tear, or obsolescence.

Euros/Dollar

The exchange rate between the euro and the U.S. dollar, indicating how much one euro is worth in U.S. dollars or vice versa.