Question

which of the following is true regarding project analysis? a. npv measures how long it takes...

which of the following is true regarding project analysis?
a. npv measures how long it takes to rcover initial invetment
b. npv measures ho long it takes to make a profit
c. the higher the interest rate the lower the NPV
d. a and c
e. b and c
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Answer #1
Option Correct / Incorrect Reason
a Incorrect Payback period measures how long it takes to recover initial investment
b Incorrect

Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.

It measures economic profit in present value term. It does not tell that how much time require to make profit.
c Correct Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
d Incorrect As per above
e Incorrect As per above

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