A Proposed Project Should Be Accepted If the Net Present

question 51

Multiple Choice

A proposed project should be accepted if the net present value is

• A)positive.
• B)negative.
• C)larger than the internal rate of return.
• D)smaller than the internal rate of return.

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Definitions:

Residual Income

The amount of income that an entity has after all costs and expenses, including the cost of capital, have been deducted.

Return On Investment

A measure of the profitability of an investment, calculated by dividing the gain from the investment by the cost of the investment.

Combined Margin

A metric that combines multiple types of profit margins (such as gross, operating, or net margin) to assess overall performance.

Contribution Margin Ratio

The percentage of sales revenue remaining after variable costs are deducted, indicating how much contributes to fixed costs and profit.