Which one of the following statements concerning net present value (npv) is correct?
A. An investment should be accepted if, and only if, the NPV is exactly equal to zero.
B. An investment should be accepted only if the NPV is equal to the initial cash flow.
C. An investment should be accepted if the NPV is positive and rejected if it is negative.
D. An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted.
E. Any project that has positive cash flows for every time period after the initial investment should be accepted.
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The Correct Answer for the given question is option C. An investment should be accepted if the NPV is positive and rejected if it is negative.
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Answer Explanation for Question: Which one of the following statements concerning net present value (npv) is correct?
The net present value rule states that investors and managers should only invest in projects with a positive net present value (NPV). They should avoid investing in projects with a negative net present value.
Investing in something that has a net present value greater than zero should logically increase a company’s earnings. For an investor, the investment should increase shareholder wealth.
As the discount rate becomes higher and higher, the present value of inflows approaches
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I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.
I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,
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