Which of the following statements is false?

A) If a project has a profitability index greater than one the project should be accepted.
B) If a firm's target average accounting return is less than that calculated for a given project then the project should be accepted.
C) If the cost of capital is greater than the IRR, the project should be accepted.
D) If a project has a payback which is faster than the company requires the project should be accepted.
E) If the NPV of a project is positive, it should be accepted.

Question

Swadeep Chaturvedi · Accepted Answer

Final Answer : C, Explanation :  The correct statement is the opposite of C: if the IRR (Internal Rate of Return) of a project is greater than the cost of capital, then the project should be accepted. If the cost of capital is greater than the IRR, it suggests the project is not expected to generate a return sufficient to cover the cost of financing, and therefore, should not be accepted.

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