What is the quantitative decision rule for the net present value method?

A) Accept investments whose return on investment exceeds the accounting rate of return.
B) Accept investments whose weighted average cost of capital exceeds the return on investment.
C) Accept investments whose required rate of return exceeds the internal rate of return.
D) Accept investments with a positive net present value.

Question

dontae cilenti · Accepted Answer

Final Answer : D, Explanation :  The quantitative decision rule for the net present value method is to accept investments with a positive net present value. This means that the present value of the cash inflows from the investment exceeds the present value of the cash outflows. If the net present value is positive, it indicates that the investment will generate more cash inflows than outflows, and thus, it should be accepted. Choosing any other option would result in potentially accepting investments that may not be profitable in the long run.

Definitions

Learning Objectives

Learning Objectives

Related questions