H12-722-ENU Exam Questions and Answers

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NEW QUESTION: 1
You are a member of a project selection committee that uses the net present value technique. Using this approach, the project is acceptable if the______________
A. Net present value of the inflow is less than the specified amount or percentage threshold
B. Gross present value of all future expected cash flow divided by the initial cash investment is greater than one
C. Net present value of the inflow is greater than the specified amount or percentage threshold
D. Sum of the net present value of all estimated cash flow during the life of the project equals the profit
Answer: C
Explanation:
The discounted cash-flow approach-or the present value method-determines the net present value of all cash flow by discounting it by the required rate of return. The impact of inflation can be considered. Early in the life of a project, net cash flow is likely to be negative because the major outflow is the initial investment in the project. If the project is successful, cash flow will become positive. [Initiating] Meredith and Mantel 2012, 51


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