Which of the following statements best explains what it mean when a project has
ID: 2761915 • Letter: W
Question
Which of the following statements best explains what it mean when a project has an NPV of $0? a. When a project has an NPV of $0, the project is earning a profit of $0. A firm should reject any project with an NPV of $0, because the project is not profitable. b. When a project has an NPV of $0, the project is earning a rate of return less than the project’s weighted average cost of capital. Its Ok to accept the project, as long as the project’s profit is positive. c. When a project has an NPV of $0, the project is earning a rate of return equal to the project’s weighted average cost of capital. Its Ok to accept the project with an NPV of $0, because the project is earning the required minimum rate of return.
Explanation / Answer
The following statement best explains the meaning of "when a project has an NPV of $0?:
c. When a project has an NPV of $0, the project is earning a rate of return equal to the project’s weighted average cost of capital. Its Ok to accept the project with an NPV of $0, because the project is earning the required minimum rate of return.
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