Knowee
Questions
Features
Study Tools

An international project's NPV is ____ related to the size of the initial investment and ____ related to the project's required rate of return.a. positively; positivelyb. positively; negativelyc. negatively; positivelyd. negatively; negatively

Question

An international project's NPV is ____ related to the size of the initial investment and ____ related to the project's required rate of return.a. positively; positivelyb. positively; negativelyc. negatively; positivelyd. negatively; negatively

🧐 Not the exact question you are looking for?Go ask a question

Solution

The correct answer is b. positively; negatively.

Here's why:

  1. The Net Present Value (NPV) of a project is calculated by subtracting the initial investment from the present value of future cash flows. Therefore, if the initial investment is larger, the NPV will be smaller, all else being equal. This means that the NPV is negatively related to the size of the initial investment.

  2. The required rate of return is the discount rate used in the NPV calculation. A higher discount rate reduces the present value of future cash flows, which in turn reduces the NPV. Therefore, the NPV is negatively related to the project's required rate of return.

So, the NPV is negatively related to both the size of the initial investment and the project's required rate of return.

This problem has been solved

Similar Questions

What is the NPV of a 6-year project that costs $100,000, has annual revenues of $50,000 and costs of $15,000? Assume the investment can be depreciated for tax purposes straight-line over 6 years, the corporate tax rate is 21%, and the discount rate is 14%.Question 4

Suppose an investment has an initial capital cost of $500, an ongoing cost of $19.50 per year and an annual benefit of $160. If the project lasts for 5 years and the discount rate is 5%, the NPV is _______, the internal rate of return is  ________ . If financing is required for this project and the financing rate is 15%, then the project should be ________.$108; 12.5%; rejected$103; 12.5%; rejected$108; 12.5%; accepted$103; 12.5%; accepted

Consider a project with the following cash flows: CF0 = -$3333 (at t=0), CF1 = 1918.14 (at t=1), and CF2 = 2207.78 (at t=2). If the required rate of return is 15.1% and the internal rate of return is 15.1%, what is the NPV of this project?[Answer: Number with 0 decimals. Do not include '$' or the thousands separator.]

NPV Calculate the net present value (NPV) for the following 20-year projects.Comment on the acceptability of each. Assume that the firm has an opportunity costof 14%.a. Initial investment is $10,000; cash inflows are $2,000 per year.b. Initial investment is $25,000; cash inflows are $3,000 per year.c. Initial investment is $30,000; cash inflows are $5,000 per year.

The required rate of return from a project is 10% and the internal rate of return of the project is 12%, hence the project should be  Accepted Rejected Accepted only if NPV is also positive Rejected even if NPV is positive

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.