Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Which of the following best describes the decision rule for Net Present Value (NPV) when evaluating investment projects?

Accept the project if NPV is less than zero.

Accept the project if NPV is greater than zero.

Accept the project if NPV equals zero.

Reject the project if NPV is greater than zero.

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Verified step by step guidance

Step 1: Understand the concept of Net Present Value (NPV). NPV is a financial metric used to evaluate the profitability of an investment project. It represents the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Step 2: Recall the decision rule for NPV. The general rule is: Accept the project if the NPV is greater than zero, as this indicates that the project is expected to generate more value than its cost.

Step 3: Analyze the options provided in the problem. Compare each option against the decision rule for NPV: (a) Accept the project if NPV is less than zero, (b) Accept the project if NPV is greater than zero, (c) Accept the project if NPV equals zero, and (d) Reject the project if NPV is greater than zero.

Step 4: Eliminate incorrect options. For example, accepting a project with NPV less than zero would mean the project is expected to lose value, which contradicts the decision rule. Similarly, rejecting a project with NPV greater than zero would ignore potential profitability.

Step 5: Identify the correct answer based on the decision rule. The correct choice aligns with the principle that projects with NPV greater than zero should be accepted, as they are expected to add value to the organization.