Which of the Following Statements Regarding the Net Present Value

question 35

Multiple Choice

Which of the following statements regarding the net present value rule and the rate of return rule is false?

• A)Accept a project if NPV > cost of investment.
• B)Accept a project if NPV is positive.
• C)Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.
• D)Reject a project if NPV is negative.

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Definitions:

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Absolute Advantage

The ability of a country, individual, or firm to produce more of a good or service than competitors using the same amount of resources.

Opportunity Cost

The cost of forgone alternatives when a decision is made to choose one option over others.

Absolute Advantage

The ability of a country, individual, company, or region to produce a good or offer a service at a lower cost per unit than the cost at which any other entity produces that good or offers that service.