What Is the Quantitative Decision Rule for the Net Present

question 102

Multiple Choice

What is the quantitative decision rule for the net present value method?

• A) Accept investments whose return on investment exceeds the accounting rate of return.
• B) Accept investments whose weighted average cost of capital exceeds the return on investment.
• C) Accept investments whose required rate of return exceeds the internal rate of return.
• D) Accept investments with a positive net present value.

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Definitions:

Incremental Manufacturing Cost

The additional cost incurred for the manufacturing of one more unit of a product.

Relevant Range

The range of activity within which the assumptions about variable and fixed costs remain valid, used in cost accounting and financial planning.

Product Costs

The costs incurred by a business to manufacture a product, including direct materials, direct labor, and manufacturing overhead.

Variable Cost

Costs that vary directly with the level of production or output, including materials and labor expenses.