Assume a project has normal cash flows.Given this,you should accept the project
A)if,and only if,the NPV is exactly equal to zero.
B)only if the NPV is equal to the initial cash flow.
C)if the NPV is positive and reject it if the NPV is negative.
D)if the total cash inflows exceed the initial cash outflow.
E)because it has positive cash flows for every time period after the initial investment.

Question

Quizplus · Accepted Answer

If a project has normal cash flows, it means that the initial investment is followed by a series of positive cash flows over time. Therefore, the best decision criteria would be to accept the project only if the NPV is positive, which means that the discounted value of future cash inflows exceeds the initial investment. Conversely, the project should be rejected if the NPV is negative, indicating that the costs exceed the benefits. Accepting a project with an NPV of zero would mean that the project generates no additional value beyond the initial investment, which is not very attractive from a financial perspective. Therefore, choice C is the best answer.

Assume a Project Has Normal Cash Flows