Analysts at Tabby Fur Storage Predict That the Net Present

question 69

Multiple Choice

Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million.How should these findings be interpreted?

• A) Although NPV is positive, its value is too low for such a large expenditure and as a result, the project should be rejected.
• B) The project should be rejected because the NPV is less than the cost of the warehouse.
• C) The project should be accepted because it will add value to the firm.
• D) More information such as the payback period should be evaluated since the reliance on only one capital budgeting technique should be discouraged.
• E) The project does not meet the acceptance criteria of the NPV method and should be rejected.

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