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:

Direct Manufacturing Cost

Expenses directly related to the production of goods, including labor and materials.

Incremental Manufacturing Cost

The extra expense associated with manufacturing an additional unit of a product.

Contribution Margin

The amount remaining from sales revenue after variable expenses are subtracted, contributing towards covering fixed costs and profit.

Variable Selling Expenses

Costs that fluctuate with the level of sales, such as commissions or shipping fees.