If the Net Present Value of an Investment Is Negative

question 62

Multiple Choice

If the net present value of an investment is negative, then:

• A) the actual rate of return is less than the discount rate.
• B) the actual rate of return is more than the discount rate.
• C) the actual rate of return is negative.
• D) the discount rate is negative.

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Definitions:

Property, Plant, and Equipment

Tangible long-lived assets used in the operations of a business, including land, buildings, and machinery.

ASPE

Accounting Standards for Private Enterprises; these are simplified accounting principles for private companies in Canada, allowing them to prepare financial statements without adhering to the more complex IFRS.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.

Current-rate Method

A method used in financial reporting to convert the financial statements of a foreign subsidiary to the parent company's currency by applying the current exchange rate.