Joan Osborne is evaluating a potential capital investment. She has calculated the net present value using a minimum rate of return of 10%. Using this rate, the net present value is negative. What does this tell her about the rate of return expected for the project

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Business

Gabriel Downs

8 August, 07:25

Joan Osborne is evaluating a potential capital investment. She has calculated the net present value using a minimum rate of return of 10%. Using this rate, the net present value is negative. What does this tell her about the rate of return expected for the project

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Answers (1)

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Aliya Werner · Answer 1

The investment of Joan Osborne is expected to produce a rate of return less that 10%.

Explanation:

This implies that the expected rate of return on the investment will the minimum rate of return.

An investment with a positive NPV would produce produce an expected rate of return higher than the minimum rate of return and vice versa.

The investment of Joan Osborne is expected to produce a rate of return less that 10%.