A Project Is Accepted Under the Net Present Value Method

question 20

Multiple Choice

A project is accepted under the net present value method when

• A) the percentage return is greater than a predetermined minimum percentage.
• B) total net cash inflows exceed the purchase price of the asset.
• C) the purchase price of the asset is less than the present value of net cash inflows.
• D) the present value of net cash inflows exceeds a predetermined minimum amount.

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Definitions:

EBIAT

Earnings Before Interest After Taxes, a measure of a company's profitability that excludes interest expenses but includes taxes.

Amortization

The process of spreading out a loan into a series of fixed payments over time, accounting for both principal and interest.

Capital Expenditures

Funds spent by a company to acquire or upgrade physical assets such as equipment or property.

Profits After Tax

The net income a company retains after paying all its taxes.