Below are two potential investment alternatives:

-Assume straight-line amortization in all computations, and ignore income taxes. The net present value in case B is
A) $8,000.
B) $(8,000).
C) $(10,696).
D) $(8,716).

Question

Below are two potential investment alternatives:
  
-Assume straight-line amortization in all computations, and ignore income taxes. The net present value in case B is
A) $8,000. 
B) $(8,000). 
C) $(10,696). 
D) $(8,716).

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the future cash flows to their present value and subtracting the initial investment. The negative sign indicates that the present value of cash inflows is less than the initial investment, resulting in a negative NPV.

Below Are Two Potential Investment Alternatives