Without using formulas, provide a definition of net present value profile.
A) A graphical representation of the relationship between varying rates of return and the corresponding NPV value.
B) A situation whereby a choice has to be made between two or more projects, and choosing multiple projects is not an option
C) The rate of return provided by a project. The value is compared with a company's rate of return to determine viability of a project.
D) A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.
E) A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.

Question

Quizplus · Accepted Answer

A net present value profile is indeed a graphical representation that shows how the net present value (NPV) of an investment project changes with different discount rates. This allows investors to understand the relationship between the discount rate and the project's NPV, helping in decision-making regarding the investment's viability.

Without Using Formulas, Provide a Definition of Net Present Value