Explanation

The future value of an investment is determined by the principal amount, interest rate, and time period.

But inflation rate is not a direct factor in the calculation.

Explanation

A higher NPV indicates higher profitability.

It means that the project is expected to generate more value or returns than its costs.

This making it a more attractive investment opportunity.

Explanation

An NPV greater than zero indicates a profit.

It means that the investment is expected to generate value and return more than the initial investment.

This suggests that the investment is viable and should be pursued.

Explanation

IRR considers time value of money, unlike Payback Period.

IRR discounts cash flows to present value, making it a more comprehensive measure.

Explanation

As a manufacturer, the cost of raw materials is a direct cost of producing goods.

It is included in the calculation of COGS (Cost of Goods Sold).

Explanation

COGS (Cost of Goods Sold) includes costs directly related to production, such as:

• Direct materials
• Direct labor
• Overhead costs (including depreciation of manufacturing equipment)

Explanation

Tax rate does not affect IRR.

As IRR is a pre-tax measure of a project's profitability.

Explanation

The basic formula for profit is: Revenue - Expenses

Profit = Revenue - Expenses

Explanation

As the compounding frequency increases, the interest earns interest more quickly, resulting in a higher future value.

This means that the investment grows faster and reaches a higher total value over time.

Explanation

Reducing operating expenses increases profit.

Because it means the company is spending less to generate the same amount of revenue, resulting in higher earnings.

Lower expenses lead to higher net income, boosting the bottom line.