When undertaling net present value calculations, an assumption is typically made that net cash inflows occur at the end of a given year. In reality, net cash flows usually occur throughout the year. What impact does that assumption of year-end net cash flows have on net present value (NPV) It has no impact on NPV because the total cash flows are the same The NPV will be overstated. The direction and significance of the Impact on NPV cannot be determined The NPV will be understated.
When undertaling net present value calculations, an assumption is typically made that net cash inflows occur at the end of a given year. In reality, net cash flows usually occur throughout the year. What impact does that assumption of year-end net cash flows have on net present value (NPV) It has no impact on NPV because the total cash flows are the same The NPV will be overstated. The direction and significance of the Impact on NPV cannot be determined The NPV will be understated.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
When undertaling
It has no impact on NPV because the total cash flows are the same
The NPV will be overstated.
The direction and significance of the Impact on NPV cannot be determined
The NPV will be understated.
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