If Net Present Values Are Used to Evaluate Two Investments

question 140

True/False

If net present values are used to evaluate two investments that have equal costs and equal total cash flows, the one with more cash flows in the early years has the higher net present value.

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Definitions:

AQL

Acceptable Quality Level, a statistical measurement used in quality control that defines the maximum number of defective items allowed in a sample lot.

Type II Error

Statistically, the probability of accepting a bad lot.

Bad Lot

A batch of products that fails to meet quality specifications or standards, often leading to rejection or rework.

LTPD

The Lot Tolerance Percent Defective, which refers to the maximum acceptable defect rate in a sample lot for the lot to be accepted.