Which One of the Following Statements Concerning Net Present Value

question 71

Multiple Choice

Which one of the following statements concerning net present value (NPV) is correct?

• A)An investment should be accepted if,and only if,the NPV is exactly equal to zero.
• B)An investment should be accepted only if the NPV is equal to the initial cash flow.
• C)An investment should be accepted if the NPV is positive and rejected if it is negative.
• D)An investment with greater cash inflows than cash outflows will always have a positive NPV.
• E)Any project that has positive cash flows for every time period after the initial investment should be accepted.

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Definitions:

Denominator Level

A term used in cost accounting to represent the base level or quantity used in calculating rates, such as in the determination of overhead rates or per-unit costs.

Fixed Overhead

Regular, consistent costs incurred by a business that are not affected by the level of goods or services produced, such as rent and salaries.

Budget Variance

The difference between the budgeted or planned amount of expenses or revenues, and the actual amount incurred or earned.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead to products based on a specific activity base.