If the level of sales is less than that calculated as the economic break-even level,then the:
A) project will break even only in accounting terms.
B) project's EVA will be greater than zero but less than the opportunity cost of capital.
C) project will have a negative EVA.
D) discount rate should be reduced.

Question

Quizplus · Accepted Answer

If the level of sales is less than the economic break-even level, it means that the project is not generating enough revenue to cover its costs, resulting in a negative EVA (economic value added). This implies that the project is creating value destruction instead of value creation, as the cost of capital is not being covered. Therefore, the best choice is C.

If the Level of Sales Is Less Than That Calculated