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- 1. Multiple Choice
NPV stands for what?
Net Present Value
Net Profit Value
Not Present Value
Nice Present Value
- 2. Multiple Choice
What is the first step in working out the NPV?
Draw a table & label Net Cash Flow, Discount Factor, Discounted Net Cash Flow
Multiply the Net Cash Flow by the correct discount factor
Add up all the discounted net cash flows and then minus off the initial cost
Advise the investment to proceed if the NPV is positive
- 3. Multiple Choice
What is the second step in working out the NPV?
Draw a table & label Net Cash Flow, Discount Factor, Discounted Net Cash Flow
Multiply the Net Cash Flow by the correct discount factor
Add up all the discounted net cash flows and then minus off the initial cost
Advise the investment to proceed if the NPV is positive
- 4. Multiple Choice
What is the third step in working out the NPV?
Draw a table & label Net Cash Flow, Discount Factor, Discounted Net Cash Flow
Multiply the Net Cash Flow by the correct discount factor
Add up all the discounted net cash flows and then minus off the initial cost
Advise the investment to proceed if the NPV is positive
- 5. Multiple Choice
What is the fourth step in working out the NPV?
Draw a table & label Net Cash Flow, Discount Factor, Discounted Net Cash Flow
Multiply the Net Cash Flow by the correct discount factor
Add up all the discounted net cash flows and then minus off the initial cost
Advise the investment to proceed if the NPV is positive
- 6. Multiple Choice
What does the time value of money mean?
The idea that a £ today is worth more than a £ in the future
The idea that a £ today is worth less than a £ in the future
The value of time in monetary terms
How much time is takes to earn an investment back
- 7. Multiple Choice
What is the theory behind "the time value of money"?
The £ received today can earn interest up until the £ in the future is received
The £ received today can lose interest up until the £ in the future is received
There is risk involved in predicting future Net Cash Flows
The idea that time is priceless and we should all live in the present
- 8. Multiple Choice
Takes account of time value of money, placing emphasis on earlier cash flows
Advantage
Disadvantage
- 9. Multiple Choice
Looks at all the cash flows involved through the life of the project
Advantage
Disadvantage
- 10. Multiple Choice
Use of discounting reduces the impact of long-term, less likely cash flows
Advantage
Disadvantage
- 11. Multiple Choice
Difficult to select the most appropriate discount rate – may lead to good projects being rejected
Advantage
Disadvantage
- 12. Multiple Choice
The NPV calculation is very sensitive to the initial investment cost
Advantage
Disadvantage
- 13. Multiple Choice
Has a decision-making mechanism – reject projects with negative NPV
Advantage
Disadvantage
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