What Effect Does the NPV of a Project Have on the Value

question 18

Multiple Choice

What effect does the NPV of a project have on the value of the firm undertaking the project?

• A)The firm's value increases or decreases by the NPV of the project.
• B)The value of a firm is not affected by the NPV of the projects it undertakes.
• C)The firm's value increases but cannot decrease because of the NPV of a project.
• D)The firm's value increases by an amount equal to the NPV of a project times the firm's effective tax rate.

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Definitions:

Fixed Assets

Fixed Assets are long-term tangible assets, such as buildings, machinery, and equipment, used in the operation of a business and not expected to be converted to cash in the next year.

Operating Fund

A pool of resources designated for the ongoing operational expenses of an organization.

Deferral Method

An accounting practice where revenue or expenses are recorded in a period different from when they are actually earned or incurred.

Programmatic Reporting

A method of reporting that involves the use of automated software to generate data reports, often used in digital advertising and marketing.