If the level of sales is less than that calculated as the NPV break-even level,then the:
A) project will break even in accounting terms.
B) project's EVA will be greater than zero but less than the opportunity cost of capital.
C) project will have a negative EVA.
D) discount rate should be reduced.

Question

Quizplus · Accepted Answer

When the level of sales is less than the NPV break-even level, it means that the project is not generating enough cash flows to cover the initial investment and the opportunity cost of capital. This results in a negative EVA (economic value added), which indicates that the project is not creating value for the shareholders. Therefore, choice C is the best option. The other choices are not applicable in this situation.

If the Level of Sales Is Less Than That Calculated