The net present value rule provides appropriate guidance for financial decision makers when costs are incurred immediately but
A) future cash flows are not known with certainty
B) marginal costs are equal to marginal revenue
C) result in a stream of benefits over several future time periods
D) marginal costs are greater then marginal revenue

Question

Quizplus · Accepted Answer

The net present value (NPV) rule provides guidance for financial decision makers when costs are incurred immediately, but the benefits result in a stream of benefits over several future time periods. This rule compares the present value of costs to the present value of future cash flows to determine if a project is worth pursuing. If the NPV is positive, the project is expected to generate a return that exceeds the required rate of return, making it a viable investment. If the NPV is negative, the costs exceed the expected benefits, making the project unprofitable. Therefore, the NPV rule is only applicable when the project yields a stream of future benefits. Thus, option C is the correct choice. Options A, B, and D are not consistent with the application of the NPV rule.

The Net Present Value Rule Provides Appropriate Guidance for Financial