In net present value analysis,the minimum desired rate of return for an investment project depends on the ________ of a proposed project.
A) expected return
B) desired return
C) risk
D) payback period

Question

Quizplus · Accepted Answer

The minimum desired rate of return in net present value analysis is also known as the discount rate or the hurdle rate. This rate reflects the opportunity cost of using the funds in the project, and it takes into account the risk associated with the investment. Therefore, the choice that best fits is C, as the risk of the project will affect the minimum desired rate of return. The expected and desired return may also influence the rate, but they are not the only factors to consider. The payback period is a measure of time, not a rate of return, and it does not take into account the time value of money.

In Net Present Value Analysis,the Minimum Desired Rate of Return