When Using the NPV Method for a Particular Investment Decision

question 22

Multiple Choice

When using the NPV method for a particular investment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then:

• A) the discount rate used was too high.
• B) the investment provides an actual rate of return greater than the discount rate.
• C) the investment provides an actual rate of return equal to the discount rate.
• D) the discount rate was too low.

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Definitions:

External Control

Influence or regulation by external factors or entities over an organization's or individual's actions and decisions.

Internal Control

Mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.