Which of the following statements regarding the NPV rule and the rate of return rule is false? A)Accept a project if its NPV 0. B)Reject a project if the NPV 0. D)Accept a project if its rate of return opportunity cost of capital.

Question

Which of the following statements regarding the NPV rule and the rate of return rule is false?
A)Accept a project if its NPV > 0.
B)Reject a project if the NPV < 0.
C)Accept a project if its rate of return > 0.
D)Accept a project if its rate of return > opportunity cost of capital.

Quizplus · Accepted Answer

The rate of return rule states that a project should be accepted if its rate of return is greater than the required rate of return. However, this rule can lead to incorrect decisions when comparing mutually exclusive projects or projects with different scales. The NPV rule, on the other hand, considers the time value of money, and therefore, takes into account the opportunity cost of capital. Therefore, the correct statements are A, B, and D.

Which of the Following Statements Regarding the NPV Rule and the Rate