Which of the Following Best Describes the Net Present Value

question 67

Multiple Choice

Which of the following best describes the Net Present Value rule?

• A) Take any investment opportunity where the net present value (NPV) is not negative; turn down any opportunity when it is negative.
• B) Take any investment opportunity where the net present value (NPV) exceeds the opportunity cost of capital; turn down any opportunity where the cost of capital exceeds the net present value (NPV).
• C) When choosing among any list of investment opportunities where resources are limited, always choose those projects with the highest net present value (NPV).
• D) If the difference between the present cost of an investment and the present value (PV) of its benefits after a fixed number of years is positive the investment should be taken, otherwise it should be rejected.

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Definitions:

Checkbook Balance

The total amount of money available in an individual's checking account, as recorded in their checkbook.

Outstanding Checks

Checks that have been written and recorded in the accounting books but not yet cashed or cleared by the bank.

Automatic Transfer

A banking service that automatically moves funds from one account to another at scheduled times or under specific conditions.

Adjusted Cash Balance

The cash amount shown on a company's books after adjustments have been made for checks outstanding, deposits in transit, and other discrepancies.