When Evaluating Projects Using NPV Approach, ________

question 29

Multiple Choice

When evaluating projects using NPV approach, ________.

• A) projects having lower early-year cash flows tend to be preferred at higher discount rates
• B) projects having higher early-year cash flows tend to be preferred at higher discount rates
• C) projects having higher early-year cash flows tend to be preferred at lower discount rates
• D) the discount rate and magnitude of cash flows do not affect the ranking by NPV approach

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Definitions:

Total Utility

The total satisfaction received from consuming a certain quantity of a good or service.

Substitution

The act of replacing one good or service with another in response to changes in price or preference, affecting consumer choices and market demand.

MU/P

Refers to the marginal utility per price, a concept in economics that describes the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service, relative to its price.

Process Innovation

The implementation of a new or significantly improved production or delivery method.