Asked by Itzamar Gutierrez on Jun 25, 2024
Verified
A project that just breaks even on a cash basis must have a zero NPV.
Cash Basis
An accounting method in which revenues and expenses are recorded only when cash is received or paid out.
Zero NPV
A situation where the net present value of a project or investment equals zero, indicating that the expected cash flows exactly discount the initial investment, resulting in no net gain or loss.
- Comprehend the principle of break-even analysis across different types (accounting, financial, cash).
Verified Answer
JS
Julia SementelliJun 28, 2024
Final Answer :
False
Explanation :
Breaking even on a cash basis means that the project's cash inflows equal its cash outflows, but NPV (Net Present Value) also considers the time value of money. A project can break even on a cash basis but still have a positive or negative NPV depending on the discount rate and the timing of cash flows.
Learning Objectives
- Comprehend the principle of break-even analysis across different types (accounting, financial, cash).