1. The net present value represents the

a. present value of future net cash flows.

b. present value of future net cash flows less the investment.

c. difference between revenue and expenses.

d. total net cash flows less investment.

2. The disadvantages of the payback approach include ____.

a. payback fails to consider the investment.

b. all cash flows of the project are used in the calculation.

c. payback ignores the time value of money.

d. all of the above.

3. Which of the following statements is correct?

a. The regular payback does not consider cash flows beyond the payback year, but the discounted payback overcomes this defect.

b. The regular payback method recognizes all cash flows over a project's life.

c. The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project.

d. The discounted payback method recognizes all cash flows over a project's life, and it also adjusts these cash flows to account for the time value of money.