As long as the NPV of a project declines smoothly with increases in the discount rate,the project is acceptable if its:
A) internal rate of return is positive.
B) payback period is greater than one.
C) rate of return exceeds the cost of capital.
D)cash inflows equals the initial cost

Question

Quizplus · Accepted Answer

A declining NPV with increases in the discount rate indicates that the project has a positive net present value at the cost of capital, which means that the rate of return exceeds the cost of capital. Therefore, choice C is the best answer. Choices A, B, and D do not necessarily indicate that the project is acceptable as they do not consider the cost of capital or the present value of cash flows.

As Long as the NPV of a Project Declines Smoothly