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A. The excess of the present value of future cash flows over the initial investment outlay...

A. The excess of the present value of future cash flows over the initial investment outlay for a project is the:

1. Internal rate of return (IRR) of the project

2. Modified internal rate of return (MIRR) on the project

3. Book (accounting) rate of return for the project

4. Net present value (NPV) of the project

5. Modified internal rate of return (MIRR) of the project

B. Items that have cash flow effects during the operating phase of an investment include cash receipts, cash expenditures, and depreciation deductions on the investment asset.

True
False
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Answer #1

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  • [A]
    Correct Answer = Option #4:
    Excess of present value of future cash flows over initial investment = NPV (Net Present Value)
    NPV = Present value of future cash flows – Initial investment.
  • [B]
    The statement is FALSE.
    This is because ‘Depreciation deductions’ has not any CASH FLOW EFFECTS, as it’s a complete non-cash item.
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