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

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

increases

remains unchanged

decreases

first increases, then decreases

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Verified step by step guidance

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

Recognize the relationship between NPV and the cost of capital: The cost of capital is the discount rate used to calculate the present value of future cash flows. As the cost of capital increases, the present value of future cash flows decreases, which impacts the NPV.

Analyze the NPV profile: The NPV profile is a graph that shows the relationship between the NPV of a project and different discount rates (costs of capital). Typically, the NPV decreases as the cost of capital increases because future cash flows are discounted more heavily.

Consider the behavior of NPV at different discount rates: At lower discount rates, the NPV is higher because cash flows are discounted less. As the discount rate increases, the NPV decreases, reflecting the reduced value of future cash flows.

Conclude the trend: Based on the NPV profile, the project's NPV decreases as the cost of capital increases. This is a fundamental principle in financial accounting and capital budgeting.