In order for a manager to correctly decide to postpone an investment until one year into the future, the NPV of the investment should:
A)Grow more rapidly than the IRR
B)Grow more rapidly than the cost of capital
C)Not decrease
D)Remain stable

Question

Quizplus · Accepted Answer

The NPV of the investment should grow more rapidly than the cost of capital in order for the manager to correctly decide to postpone the investment until one year into the future. This is because if the NPV is growing slower than the cost of capital, then the investment is not generating enough return to cover the cost of capital, and it would not make sense to postpone the investment.

In Order for a Manager to Correctly Decide to Postpone