Joan Osborne Is Evaluating a Potential Capital Investment

question 154

Multiple Choice

Joan Osborne is evaluating a potential capital investment. She has calculated the net present value using a minimum rate of return of 10%. Using this rate, the net present value is negative. What does this tell her about the rate of return expected for the project?

• A) If the net present value is negative; the expected rate of return for the project is greater than the 10% minimum or required rate of return.
• B) If the net present value is negative; the expected rate of return for the project is less than the 10% minimum or required rate of return.
• C) If the net present value is negative; the expected rate of return for the project is equal to the 10% minimum or required rate of return.
• D) None of the other answers is correct.

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