Which of the Following Best Describes the Net Present Value

question 106

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.
• E)If the NPV is positive and the initial investment will be recovered within a certain time period,the investment should be taken.

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Definitions:

Investing Wisely

The process of allocating resources, typically money, in different financial instruments or assets with the aim of generating favorable returns while managing risks.

Flexible

The ability to adapt to changes and respond to varying needs and conditions with ease.

Succession Plan

A strategy for passing on leadership roles, often including the ownership of a company to an heir or successor.

Financing

The process of providing funds for business activities, making purchases, or investing, through loans, equity investments, or other means.