The NPV of an investment made today is $10,000.If postponed for one year, the NPV at that time will increase by $1,000.Which of the following is correct if the opportunity cost of the investment is 12 percent?
A)postpone; the NPV increases by a positive amount.
B)postpone; the NPV will be larger.
C)invest now; NPV does not grow at a sufficient rate.
D)invest now; always accept positive NPV projects.

Question

Quizplus · Accepted Answer

The NPV increases by $1,000 when postponed for a year, but this is less than the 12% growth rate that could be achieved by investing now. Therefore, the NPV does not grow at a sufficient rate to justify postponing the investment.

The NPV of an Investment Made Today Is $10,000