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

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

This NPV profile demonstrates that as the cost of capital increases, the project's NPV:

remains unchanged

decreases

first increases, then decreases

increases

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Verified step by step guidance

Understand the concept of Net Present Value (NPV): NPV is a financial metric used to evaluate the profitability of a project by discounting future cash flows to their present value using a specific cost of capital (discount rate).

Recognize the relationship between NPV and the cost of capital: As the cost of capital increases, the discount rate applied to future cash flows also increases, which reduces the present value of those cash flows.

Analyze the NPV profile: The NPV profile is a graphical representation of how NPV changes with varying discount rates. Typically, as the cost of capital increases, the NPV decreases because future cash flows are discounted more heavily.

Consider the behavior of NPV at different discount rates: At very low discount rates, NPV may be high or positive. As the discount rate increases, NPV generally decreases and may eventually become negative if the cost of capital exceeds the project's return.

Conclude the correct answer based on the NPV profile: The correct answer is that as the cost of capital increases, the project's NPV decreases, which aligns with the typical behavior of NPV profiles.