If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.

Question

Quizplus · Accepted Answer

When the present value of future cash inflows exceeds the amount to be invested, it means that the project is expected to generate a positive net present value (NPV). This also implies that the rate of return on the proposal exceeds the rate used in the analysis. Therefore, the statement is true.

If in Evaluating a Proposal by Use of the Net