Accepting a Project with a ________ NPV Makes the Firm

question 46

Multiple Choice

Accepting a project with a ________ NPV makes the firm worse off financially because the cost of the investment exceeds the ________.

• A) positive; present value of future benefits
• B) negative; present value of future cash flows
• C) negative; present value of present cash flows
• D) positive; present value of present cash flows

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Definitions:

Going Price

The current market rate at which a particular good, service, or commodity can be bought or sold.

Market

A system or arena in which commercial dealings are conducted, or where supply meets demand.

Equilibrium Quantity

The level of output at which demand and supply in the market balance perfectly, setting the stage for stable prices unless external factors intervene.

Demand Schedule

A table or graph showing the quantity of a good that consumers are willing to purchase at various prices.