Which of the Following Is True About the Net Present

question 21

Multiple Choice

Which of the following is true about the net present value method?

• A)It is the best single measure of a project's profitability.
• B)It is the best single measure of a project's overall risk.
• C)It is the best single measure of a project's liquidity risk.
• D)It is not a good measure of a project's profitability.

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Definitions:

Capital Investment

Funds spent by a company to purchase or upgrade physical assets such as property, plants, or equipment to improve its business.

Qualitative Characteristic

A feature or attribute of accounting information, such as relevance or reliability, which enhances its usefulness for decision-making.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculated by discounting all cash flows to their present value using a specified discount rate.

Future Cash Inflows

Expected receipts of cash in the future from various sources, including operations, investments, and financing activities.