The Calculation of the Net Present Value of an Investment

question 31

Multiple Choice

The calculation of the net present value of an investment project requires that the depreciation tax shield be included at:

• A) the amount of the depreciation with no adjustment for taxes.
• B) the amount of the depreciation times one minus the tax rate.
• C) the amount of the depreciation times the tax rate.
• D) zero, since depreciation is not relevant to the calculation of net present value.

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Definitions:

Product Costs

Direct costs associated with the production of goods sold by a company, including direct materials, direct labor, and manufacturing overhead.

Process Cost Accounting System

An accounting system that accumulates costs for each process or department within a production environment.

Continuous Production

A manufacturing process where materials are produced without interruption around the clock.

Like Units

A term used in manufacturing or project management to describe items or resources that are comparable in function or use, often for the purpose of standardization or simplification.