According to the NPV rule,all projects should be accepted if NPV is positive when discounted at the:
A) internal rate of return.
B) opportunity cost of capital.
C) risk-free interest rate.
D) accounting rate of return.

Question

Quizplus · Accepted Answer

The NPV rule states that a project should be accepted if its NPV is positive when discounted at the opportunity cost of capital. This is because the opportunity cost of capital represents the minimum rate of return that investors could earn by investing in a similar project with similar risk. Therefore, accepting projects with a positive NPV at this rate ensures that the project will generate returns higher than the cost of capital and create value for the company. Discounting at the internal rate of return or risk-free interest rate does not necessarily reflect the cost of capital, and using the accounting rate of return as a decision-making tool has several drawbacks.

According to the NPV Rule,all Projects Should Be Accepted If