Question

Which of the following is typically not important when calculating the net present value of a

project?
A. timing of cash flows from the project.
B. income tax effect of cash flows from the project.
C. method of financing the project.
D. amount of cash flows from the project.

Answer 1

The correct answer is option c. The method of financing the project is typically not important when calculating the net present value (NPV) of a project.

Step-by-step explanation:

While calculating the net present value (NPV) of a project the method of financing the project is typically not important. The net present value is a financial measurement that takes into account the timing of cash flows from the project, the income tax effect of cash flows, and the amount of cash flows.

It helps determine the profitability and worthiness of an investment by comparing the present value of expected cash inflows and outflows. The method of financing, such as debt or equity, does not directly affect the NPV calculation. However, it may have an indirect impact on the cash flows, such as interest payments or dividends.