alleryStart learning →A project costs 500 and returns a single 540 after one year. At a 10 percent hurdle rate, what should the firm do?
AAccept, as NPV is 40
BAccept, as NPV is 9
CReject, as NPV is -9
DReject, as NPV is -40
Answer & Solution
Correct answer: C. Reject, as NPV is -9
540/1.10 is 490.91, which is below the 500 outlay, so NPV is about minus 9 and the project fails.
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