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:

Deductible

An expense that can be subtracted from gross income to reduce taxable income, thereby lowering the tax liability.

Trade Or Business

Engagements or activities conducted for the purpose of income or profit, characterized by continuity and regularity.

Mortgage Interest

The interest charged on a loan used to purchase a property, often tax-deductible for the borrower.

Depreciation

An accounting method that allocates the cost of a tangible asset over its useful life.