PRC-2 · Chapter 6 · Question 17 of 45
According to the Net Present Value (NPV) decision rule, a company should automatically reject an independent investment project if:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The NPV is strictly less than zero (negative).
Explanation
A negative NPV indicates that the present value of the project's costs exceeds the present value of its returns. Undertaking the project would mathematically destroy corporate value, so it must be rejected.
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