In Using the Net Present Value (NPV)approach to Evaluating Credit

question 15

Multiple Choice

In using the net present value (NPV) approach to evaluating credit policy alternatives,all other things equal,

• A)the alternative with the highest NPV should be selected
• B)the alternative with the lowest NPV should be selected
• C)the alternative with the NPV closest to zero should be selected
• D)the alternative with the present value of cash inflows closest to zero should be selected

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Definitions:

Revenues

The cumulative income derived from transactions involving goods or services tied to the main business functions.

Expenses

Costs incurred by a business in the process of earning revenue, which are not directly tied to the production of goods or services.

Accounting Standard-Setting Body

An organization that establishes benchmarks or rules for preparing and presenting financial statements and other related accounting practices.

Securities and Exchange Commission

The U.S. federal agency responsible for regulating the securities industry and ensuring public companies adhere to disclosure laws.