All Else Constant,the Net Present Value of a Typical Investment

question 33

Multiple Choice

All else constant,the net present value of a typical investment project increases when

• A)the discount rate increases.
• B)each cash inflow is delayed by one year.
• C)the initial cost of a project increases.
• D)the rate of return decreases.
• E)all cash inflows are moved to the last year of the project.

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Definitions:

Interest Portion

The part of a payment or financial obligation that represents the cost of borrowing or the charge for the service of using someone else's money.

Carrying Amount

Also known as book value, this is the value of an asset as recorded in the company's balance sheet, after deducting accumulated depreciation or amortization.

Bond Discount Account

An account that shows the difference between the face value and the lower selling price of a bond, which is amortized over the life of the bond.

Balance Sheet

A financial statement that provides a snapshot of a company's financial condition at a specific point in time, detailing assets, liabilities, and equity.