Using an Excel Spreadsheet to Calculate Net Present Value (NPV)has

question 75

Multiple Choice

Using an Excel spreadsheet to calculate net present value (NPV) has an advantage over using a financial calculator because

• A) the spreadsheet retains the full precision of all non-rounded numbers while the calculator will cumulate rounding errors.
• B) not all financial calculators compute NPV using the same parameters.
• C) financial calculators cannot differentiate between payments made immediately or payments deferred by one period.
• D) financial calculators cannot solve when the unknown is other than NPV (e.g.: NPV given, solve for the interest rate).

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Definitions:

Budgeted Sales

Forecasted revenue a company expects to generate from selling its products or services in a specific period.

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a later date.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Credit Sales

Sales of goods or services where the payment is delayed as per agreed terms, instead of requiring immediate payment.