Financial Metrics

What is the meaning of Net Present Value (NPV)?

• Total amount of future investment

• Present value of all money to be received minus initial cost

• Net profit after tax

• Total project revenue

If the NPV is positive, what does it mean for the project?

• The project is very risky

• The project will lose money

• The project is profitable

• The project cannot be evaluated

What does IRR (Internal Rate of Return) show?

• How long the project will run

• The rate that makes the NPV equal to zero

• Total capital needed

• Present value of project cost

If a project’s IRR is higher than the company’s required rate of return, what does it indicate?

• The project should be delayed

• The project is attractive

• The project is not profitable

• The IRR must be recalculated

What does the Payback Period measure?

• Total profit from the project

• Time needed to recover the investment

• Residual value of the asset

• Project IRR

The Time Value of Money (TVM) means:

• Future money is more valuable

• Money has no time value

• Money today is more valuable

• Money value is always constant

What are mutually exclusive projects?

• Projects that must run together

• Projects that can’t be compared

• Projects where choosing one means rejecting the other

• Projects that can be done together with limited funds

What is a Discount Rate?

• Total money invested

• Raw mate

What is a Discount Rate?

• Total money invested

• Raw material cost

• Interest rate used to calculate present value

• Net profit of the project

Capital Budgeting helps companies to:

• Save daily expenses

• Decide project-related taxes

• Choose the best long-term project

• Pay off debts