When a firm uses the net present value method for capital budgeting decisions with a 10% discount rate, what does a negative net present value indicate?
A)the proposal's rate of return exceeds 10%.
B)the proposal's rate of return is less than the minimum rate required.
C)the proposal earns a rate of return between 9% and 10%.
D)None of the answers are correct.

Question

Quizplus · Accepted Answer

A negative net present value indicates that the proposal's rate of return is less than the discount rate of 10%, meaning it does not meet the minimum required rate of return.

When a Firm Uses the Net Present Value Method for Capital