When Computing the NPV of a Capital Budgeting Project, One

question 61

Multiple Choice

When 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:

Analogy

A comparison between two objects or concepts for the purpose of explanation or clarification, often suggesting that if they are alike in some respects, they are probably alike in others too.

Conclusion

The final part of something, typically a judgment or decision that has been reached by reasoning.

Similarity

The state or fact of being similar; resemblance or likeness.

Strong Arguments

Arguments where if the premises are true, the conclusion is likely to be true, showing a high degree of logical support.