Which one of the following statements is correct? a) The net present value is a measure...
Which one of the following statements is correct?
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a) The net present value is a measure of profits expressed in today's dollars. |
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b) The net present value is positive when the required return exceeds the internal rate of return. |
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c) If the initial cost of a project is increased, the net present value of that project will also increase. |
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d) Net present value is equal to an investment's cash inflows discounted to today's dollars. |
Homework Answers
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a) The net present value is a measure of profits expressed in today's dollars. |
Net present value is calculated by subtracting initial investment minus present value of cash inflows. It is a measure of profit measured in dollars. When required rate exceeds internal rate of return, net present value will be negative. When initial cost increases, present value will decrease.
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