Which of the following statements regarding the NPV decision rule is FALSE?
A)Reject projects with a NPV of zero,as accepting them is equivalent to reducing firm value.
B)When faced with a set of alternatives,choose the one with the highest NPV.
C)Accept those projects with a positive NPV,as accepting them is equivalent to receiving their NPV in cash today.
D)Reject those projects with a negative NPV.

Question

Quizplus · Accepted Answer

This statement is false because accepting projects with a NPV of zero may still be beneficial for the firm as long as it generates a return that is greater than the required rate of return. Therefore, projects with a NPV of zero should not be automatically rejected.

Which of the Following Statements Regarding the NPV Decision Rule