The Net Present Value Method of Evaluating Proposed Investments

question 24

Multiple Choice

The net present value method of evaluating proposed investments:

• A) discounts cash flows at the minimum rate of return.
• B) measures a project's time adjusted rate of return.
• C) ignores cash flows beyond the payback period.
• D) applies to only mutually exclusive investment proposals.

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Definitions:

Breached Fiduciary Duty

A violation of the obligation to act in the best interest of another party, often related to situations of trust and confidence.

Profit Made

The financial gain achieved when the amount earned from a business activity exceeds the expenses, costs, and taxes.

Board Of Directors

A group of individuals elected by shareholders to oversee the management and make key decisions for a corporation.

Derivative-Action Provision

A component in corporate governance that allows a shareholder to sue or take legal action on behalf of the corporation, often against directors or management for misconduct.