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An investment project is accepted if its NPV is less than its WACC. True False

  1. An investment project is accepted if its NPV is less than its WACC.

    True

    False

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Answer #1

If net present value is less than weighted average cost of capital, it will mean that the company is not able to to exceed the hurdle rate and it is not able to recover the cost of the capital from the net present value of the project so if the net present value is not higher than weighted average cost of capital, it will mean that a project is not yielding with the the required benefits to the company and it should not be accepted.

Generally there is a a trend of comparison of internal rate of return with weighted average cost of capital.

So, the given statement is FALSE.

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