Answered: TRUE OR FALSE: No need of long exlain…

TRUE OR FALSE: No need of long exlain 1. The longer the time before the revenues are received, the higher is the net present value of those revenues.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.2IP

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TRUE OR FALSE: No need of long exlain 1. The longer the time before the revenues are received, the higher is the net present value of those revenues. 2. The more uncertain the future, the lower should be the discount factor in evaluating an investment. 3. In evaluating an investment, we do not discount the cost regardless of when the cost is incurred.

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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