Q1. Net present value is an effective way to evaluate keep or replace decisions.

Question

Q1. Net present value is an effective way to evaluate keep or replace decisions.
True
False

Q2. The hurdle rate is usually determined by the accountant after performing the NPV calculation.
True
False

Q3. A company chooses to drop a product line which generates $50K of sales annually. This $50K represents an opportunity cost.
True
False

Q4. Discounted cash flow models are effective because the market is always perfect.
True
False

Q5. The Payback Period calculation represents the length of time it takes to recuperate initial capital investment.
True
False

Explanation / Answer

As per policy only 1st question will be answered

Q1. True -- NPV is calculated to find present value of future investments and hence help in making decisions

Q2. True - Huddle rate is minimum guranteed return, which is determined after NPV calculation

Q3 False- Opportunity cost is $50K minus cost of producing

Q4 True- Discounted Cash Flow assumes that markets are perfect

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