Kresta Can Invest in a Scheme Which Will Pay $10,000

question 79

Multiple Choice

Kresta can invest in a scheme which will pay $10,000 at the end of each of the next four years.She must make an investment at the start of the first year of $32,000.Should she make this investment,given that the interest rate is 7%?

• A)Yes,because the net present value (NPV)is negative.
• B)Yes,because the net present value (NPV)is positive.
• C)No,because the net present value (NPV)is negative
• D)No because the net present value (NPV)is positive.
• E)No,because the net present value (NPV)is zero.

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Definitions:

Percentage-of-Completion

A method of revenue recognition in accounting where revenue and expenses are recognized as a project progresses, based on the percentage of work completed.

Revenue Recognition

The accounting principle that dictates the process and timing by which revenue is recorded and recognized as income on the financial statements.

Specific Industry Guidance

Regulations and recommendations tailored to the operating practices and challenges of particular sectors.

GAAP

Short for Generally Accepted Accounting Principles, a set of rules and standards designed to ensure consistency in financial reporting.