A financial manager is evaluating a project which is expected to generate profits of $100,000 per year for the next 10 years.The project should be accepted if
A) the cost of the project is less than $1,000,000.
B) the cost of the project is less than the present value of $100,000 per year for 10 years.
C) this project's expected profits are higher than any other projects the corporation has available.
D) the present value of the project's cash inflows exceeds the present value of the project's cash outflows.

Question

Quizplus · Accepted Answer

The best option is D because it ensures that the project's cash inflows are greater than its cash outflows when accounting for the time value of money. This is important for determining the profitability of a project and its overall value to the company. Option A is not as precise, as it does not consider the time value of money. Option B is not incorrect, but it does not take into account any additional benefits or costs that may arise over the course of the project's lifetime. Option C is irrelevant as it does not provide any useful information for evaluating the project's profitability.

A Financial Manager Is Evaluating a Project Which Is Expected