When evaluating a proposal by use of the net present value method, if there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.

Question

Quizplus · Accepted Answer

This is correct, as the net present value method looks at the present value of future cash inflows compared to the initial investment. If the present value of cash inflows is greater than the investment, then the project will have a positive net present value and a rate of return that is greater than the discount rate used in the analysis.

When Evaluating a Proposal by Use of the Net Present