The following statements regarding the NPV rule and the rate of return rule are true except: A) Accept a project if its NPV 0 B) Reject a project if the NPV 0 D) Accept a project if its rate of return opportunity cost of capital

Question

The following statements regarding the NPV rule and the rate of return rule are true except:
A) Accept a project if its NPV > 0
B) Reject a project if the NPV < 0
C) Accept a project if its rate of return > 0
D) Accept a project if its rate of return > opportunity cost of capital

Quizplus · Accepted Answer

The rate of return rule states that a project should be accepted if its rate of return is greater than the required rate of return or opportunity cost of capital. However, in statement C, it simply states that a project should be accepted if its rate of return is greater than zero, which is not always true. A project may have a positive rate of return, but if it is less than the required rate of return, it should be rejected. Therefore, C is not a true statement.

The Following Statements Regarding the NPV Rule and the Rate