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 increase of $1,000 is less than the opportunity cost of 12%, which means the investment does not grow at a sufficient rate to justify postponing.

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