Explanation

If the discount rate increases, NPV decreases.

As higher discount rates reduce the present value of future cash flows.

This making the investment less valuable due to higher opportunity cost or risk.

Explanation

An IRR greater than the required rate of return indicates a profit.

It means the investment is expected to generate value and is a good opportunity.

It shows that the returns from the investment are higher than the costs, resulting in a positive NPV.

Explanation

In a perpetual inventory system, the cost of goods sold (COGS) is recorded after each sale.

As the inventory records are continuously updated to reflect the sale and the corresponding cost of the goods sold.

This allows for a real-time tracking of COGS and inventory levels.

Explanation

The income statement, also known as the profit and loss statement (P&L).

It shows the revenues, expenses, and net profit of a company over a specific period of time, such as a month, quarter, or year.

It provides a snapshot of the company's profitability and financial performance.

Explanation

NPV is most useful in evaluating long-term capital investments.

As it considers the time value of money.

It can help managers prioritize projects with higher returns over longer periods.

Explanation

In NPV analysis, 'salvage value' is the estimated value of a project's assets at the end of its life.

It is also known as the final cash inflow or residual value.

It is included as a cash inflow in the NPV calculation.

Explanation

NPV calculation requires initial investment, future cash inflows, and discount rate, but not annual profit margin.

Profit margin is a ratio used to evaluate profitability, but it's not a direct input in the NPV formula.

Explanation

Inflation decreases NPV by reducing the present value of future cash flows.

As the purchasing power of money earned in the future is eroded by inflation.

This means that the value of future cash flows is lower in real terms, leading to a lower NPV.