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:

Volcanoes

Openings in Earth's crust that allow molten rock, ash, and gases to escape from below the surface.

Earthquakes

Natural phenomena involving the shaking of the ground, usually caused by the movement of tectonic plates beneath the Earth's surface.

Distributions

The manner in which a phenomenon or characteristic is spread out over an area or volume.

Continent-continent Convergence

A tectonic process involving the collision of two continental plates, typically resulting in the formation of mountain ranges.