Exam L4M7 Topic 1 Question 73 Discussion
Actual exam question for CIPS's L4M7 exam
Question #: 73
Topic #: 1
Question #: 73
Topic #: 1
Assuming that all other factors are constant except one, the net present value of a capital expendi-ture increases when...?
Suggested Answer: C Vote an answer
Net present value (NPV) is the 'today' net value that deprives from 'future' cash flow of an invest-ment or a capital purchase.
The following formula is used to calculate NPV
Chart Description automatically generated with low confidence
Where:
Rt is the net cash flow (cash inflow - cash outflow) during the period t i is the discount rate t is the number of time periods As you can conclude from the above formula, the net present value increases when the numerators (net cash flows) increase and/or denominators (1+i) decrease. So the correct answer should be "Net cash flow during a time period increases" The purpose of this exercise is to help you identify the factors that influence the net present value and how to increase/decrease NPV in real-world scenario.
The following formula is used to calculate NPV
Chart Description automatically generated with low confidence
Where:
Rt is the net cash flow (cash inflow - cash outflow) during the period t i is the discount rate t is the number of time periods As you can conclude from the above formula, the net present value increases when the numerators (net cash flows) increase and/or denominators (1+i) decrease. So the correct answer should be "Net cash flow during a time period increases" The purpose of this exercise is to help you identify the factors that influence the net present value and how to increase/decrease NPV in real-world scenario.
by Harry at Jan 13, 2026, 10:46 PM
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