Which of the following statements regarding the net present value rule and the rate of return rule is false?
A)Accept a project if NPV cost of investment.
B)Accept a project if NPV is positive.
C)Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.
D)Reject a project if NPV is negative.

Question

Which of the following statements regarding the net present value rule and the rate of return rule is false?
A)Accept a project if NPV > cost of investment.
B)Accept a project if NPV is positive.
C)Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.
D)Reject a project if NPV is negative.

Quizplus · Accepted Answer

The correct statement is to accept a project if NPV is greater than 0, not necessarily greater than the cost of investment. NPV is calculated by subtracting the cost of investment from the present value of future cash flows. A positive NPV indicates that the project's return exceeds the cost of investment, making B, C, and D correct under standard financial principles.

Which of the Following Statements Regarding the Net Present Value