Which of the following statements is FALSE?
A) The higher the minimum desired rate of return, the lower the present value of each future cash flow.
B) Higher required rates of return lead to lower net present values for capital investments.
C) Higher required rates of return lead to higher net present values for capital investments.
D) The net present value for a project can be negative or positive depending on the minimum desired rate of return used.

Question

Quizplus · Accepted Answer

This statement is false because higher required rates of return lead to lower net present values for capital investments, not higher. The higher the required rate of return, the higher the discount rate used to calculate the present value of future cash flows, which results in a lower net present value.

Which of the Following Statements Is FALSE