A project with higher than average risk offers an expected return of 14%.Which statement is correct if the company's opportunity cost of capital is 12% and the project's opportunity cost of capital is 15%?
A) Project NPV is positive; it should be accepted.
B) Project NPV is negative; it should be rejected.
C) Project NPV is positive but it should be rejected.
D) Project NPV is negative but it should be accepted.

Question

Quizplus · Accepted Answer

The project's opportunity cost of capital is higher than the company's opportunity cost of capital, which means that the project is not generating returns above the minimum expected rate of return for the company. As a result, the project's NPV is negative, and it should be rejected.

A Project with Higher Than Average Risk Offers an Expected