QUESTION 1

What is the best way to describe Net Present Value?

1. The present value of all payments after taxes.
2. The difference in all incoming cash-flows and outgoing cash-flows.
3. The present value of all incoming cash-flows subtract the present value of all outgoing cash-flows.

QUESTION 2

A company has decided to complete a project that will bring in some money over the next several years. After working out the details, they find the NPV to be less than 0. What would you conclude?

1. This project will be losing them money.
2. We cannot make any definitive conclusions.
3. This project will have a negative loss. This project is ok to go forward.

QUESTION 3

A project has a cost of $10,000 (this is the only outgoing cash-flow) and the NPV works out to be 0. What does this mean?

1. The PV of all the incoming cash-flows must also equal $10,000.
2. It is possible that the PV of all incoming cash-flows is greater than $10,000.
3. We cannot determine the PV of incoming cash-flows.

QUESTION 4

The present value of all outgoing cash-flows is $15,000. The NPV is greater than 0. What do we know about the present value of all the incoming cash-flows?

1. The value is < 0.
2. The value is 0.
3. The value is > 0.