Which of the following projects would you feel safest in accepting? Assume the opportunity cost of capital to be 12 percent for each project.
A)"A" has a small, but negative, NPV
B)"B" has a positive NPV when discounted at 10 percent
C)"C's" cost of capital exceeds its rate of return
D)"D" has a zero NPV when discounted at 14 percent

Question

Quizplus · Accepted Answer

Project D has a zero NPV when discounted at 14 percent, which means it will exactly earn the required rate of return to cover the opportunity cost of capital. Therefore, accepting Project D would be the safest option. Projects A and C have negative NPVs, indicating that they would not generate sufficient returns to cover the cost of capital, and Project B has a positive NPV but only when discounted at 10 percent, which is lower than the opportunity cost of capital.

Which of the Following Projects Would You Feel Safest in Accepting