Which one of the following statements is NOT true?
A) Accepting a positive-NPV project increases shareholder wealth.
B) Accepting a negative-NPV project has no impact on shareholder wealth.
C) Accepting a negative-NPV project decreases shareholder wealth.
D) Managers are indifferent about accepting or rejecting a zero NPV project.

Question

Quizplus · Accepted Answer

Accepting a negative-NPV project would actually decrease shareholder wealth, as the project is expected to generate less cash flow than the investment cost. Therefore, statement B is false. A is true as positive-NPV projects generate more cash flows than the investment cost, increasing shareholder wealth. C is also true as negative-NPV projects decrease shareholder wealth. D may be true in some cases, as managers may have non-financial reasons for accepting or rejecting a project with zero NPV.

Which One of the Following Statements Is NOT True