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:

Estoppel

A legal principle that prevents someone from arguing something contrary to a previous position or statement that was relied upon by others.

Negligence

The failure to exercise the care that a reasonably prudent person would under similar circumstances, resulting in unintended harm to others.

Partner's Liability

The legal responsibility held by partners in a partnership to cover the business's debts and other financial obligations.

Partnership Agreement

A contract between partners in a partnership which outlines the terms and conditions of the relationship between the partners.