Angel is working on a project at Megahypertech Inc., a wellknown multinational corporation. She is using capital budgeting to estimate the project's future cash flows. She finds that the present value of its estimated future cash flows is greater than the cost of the project. How likely is she to gain approval from the board?
A) She will quite certainly gain approval since her project has a positive net present value.
B) Approval is probable but not likely as she failed to account for the time value of money.
C) She will not gain approval as she failed to consider whether the project is leadingedge or not.
D) Approval is probable but not likely as her project has been constructed on estimates, as opposed to facts.

Question

Angel is working on a project at Megahypertech Inc., a well­known multinational corporation. She is using capital budgeting to estimate the project's future cash flows. She finds that the present value of its estimated future cash flows is greater than the cost of the project. How likely is she to gain approval from the board?
A) She will quite certainly gain approval since her project has a positive net present value.
B) Approval is probable but not likely as she failed to account for the time value of money.
C) She will not gain approval as she failed to consider whether the project is leading­edge or not.
D) Approval is probable but not likely as her project has been constructed on estimates, as opposed to facts.

Quizplus · Accepted Answer

A project with a positive net present value implies that the present value of its estimated future cash flows is greater than the initial investment. This is a good sign for the project's profitability, and it is likely that Angel will gain approval from the board. The other options, such as accounting for time value of money, project being leading-edge or not, or fact-based estimates, may also be important considerations, but they do not affect the positive net present value of Angel's project, which is the most crucial factor for gaining approval.

Angel Is Working on a Project at Megahypertech Inc