Which of the Following Statements Regarding the NPV Decision Rule

question 12

Multiple Choice

Which of the following statements regarding the NPV decision rule is FALSE?

• A)Reject projects with a NPV of zero,as accepting them is equivalent to reducing firm value.
• B)When faced with a set of alternatives,choose the one with the highest NPV.
• C)Accept those projects with a positive NPV,as accepting them is equivalent to receiving their NPV in cash today.
• D)Reject those projects with a negative NPV.

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Definitions:

Long Run

A time period in economics during which all factors of production and costs are variable, allowing for all adjustments to be made to achieve an equilibrium.

Competitive Increasing-cost Industry

An industry in which the entry of new firms causes the input prices to increase, leading to upward-sloping supply curves for the firms.

Long-run Equilibrium

A state in economics where all factors of production are fully adjusted to the market condition and all economic agents have no incentive to change their behavior.

Consumer Demand

The desire and willingness of consumers to purchase a certain quantity of goods or services at various price points, at a particular time.