The Net Present Value of a Proposed Investment Is Negative

question 88

Multiple Choice

The net present value of a proposed investment is negative. Therefore, the discount rate used must be:

• A)greater than the project's internal rate of return.
• B)less than the project's internal rate of return.
• C)greater than the minimum required rate of return.
• D)less than the minimum required rate of return.

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Definitions:

Fixed Cost

Fixed costs are business expenses that remain constant regardless of the levels of production or sales, such as rent, salaries, or loan payments.

Variable Cost

Costs that vary directly with the level of production or output.

Continue to Operate

The decision by a company or business to keep running its operations despite various challenges.

Marginal Cost

The cost of producing one additional unit of a product or service, a critical factor in economic decision-making.