A Net Present Value of Zero Implies That an Investment

question 29

Multiple Choice

A net present value of zero implies that an investment:

• A)has an initial cost of zero
• B)has cash inflows which have a zero present value
• C)has no expected impact on shareholders
• D)does not pay back its initial cash outlay
• E)has a profitability index that is less than 1.0

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Definitions:

Accounting Information

Data related to financial transactions and status of a business, used for analysis, decision making, and financial reporting.

Ending Retained Earnings

The amount of net income left over for the business after it has paid out dividends to its shareholders, captured at the close of an accounting period.

Revenues

The total income generated by a business from its normal business operations, including sales of goods and services, before any expenses are deducted.

Expenses

Outflows or using up of assets as a part of operations of a business to generate revenue.