A Firm Is Evaluating an Investment Proposal Which Has an Initial

question 105

Multiple Choice

A firm is evaluating an investment proposal which has an initial investment of $5,000 and cash flows presently valued at $4,000. The net present value of the investment is ________.

• A) -$1,000
• B) $0
• C) $1,000
• D) $1.25

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Definitions:

Variances

The difference between planned or expected financial outcomes and the actual results, often analyzed in budgeting and cost management.

Performance Reports

Documents that compare actual work performance against planned or expected outcomes.

Variable Cost

A cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit.

Fixed Cost

A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity.