Can any body answer this question and explain the reason, thank you

[hanshua]

A company should NOT go ahead with a capital project if:
Choose ONLY one answer.

a. Its shareholders could invest in an alternative project offering a higher expected internal rate of return

b. It could use the available funds to re-pay all its debts

c. The project's Net Present Value using a risk-adjusted discount rate is negative

d. It could invest in an alternative project offering a higher expected internal rate of return

 

[mattt78]

capital project question

A company should NOT go ahead with a capital project if:
Choose ONLY one answer.
a. Its shareholders could invest in an alternative project offering a higher expected internal rate of return
b. It could use the available funds to re-pay all its debts
c. The project's Net Present Value using a risk-adjusted discount rate is negative
d. It could invest in an alternative project offering a higher expected internal rate of return

ok, i'm not certain, but here's my 2 pence worth to help get some discussion going:

I assume the answer is c - there is no point investing in a project if you would be better off doing nothing instead!

not a or d, since neither considers the level of risk, and not b, since the co may be paying a lower rate of interest on the debt than it can receive on the project (after factoring in risk)