In Computing the NPV of a Capital Budgeting Project, One

question 46

Multiple Choice

In computing the NPV of a capital budgeting project, one should NOT

• A) estimate the cost of the project.
• B) discount the future cash flows over the project's expected life.
• C) ignore the salvage value.
• D) make a decision based on the project's NPV.

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Definitions:

Horizontal Axis

In graphing, this is the x-axis, typically used to represent the independent variable or categories being compared.

Straight Line

A geometric figure formed by two points and extended infinitely in both directions.

Decreasing Rate

Describes a situation where the rate at which something happens or is done reduces over time.

Increasing Rate

A situation where the magnitude or quantity of something grows at a pace that accelerates over a given period of time.