The decision rule for net present value is to:
A)Accept all projects with cash inflows exceeding initial cost
B)Reject all projects with rates of return exceeding the opportunity cost of capital
C)Accept all projects with positive net present values
D)Reject all projects lasting longer than 10 years

Question

Quizplus · Accepted Answer

The decision rule for net present value is to accept all projects with positive net present values. This means that the expected total cash inflows of the project should be higher than the initial investment cost, discounted at a rate equal to the opportunity cost of capital. Projects with negative net present values should be rejected because they would result in a loss for the company. The other options are not correct decision rules for net present value.

The Decision Rule for Net Present Value Is To