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:

Dependent Variable

A variable in research that is expected to change as a result of manipulations in the independent variable.

Independent Variable

A variable that is manipulated in an experiment to determine its effect on the dependent variable.

Cause-and-Effect Relationship

A connection between two events where one (the cause) directly results in the occurrence of the other (the effect).

Research Method

A systematic approach to conducting research that involves collecting data, analyzing information, and presenting findings.