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

The best choice is to accept the project if the NPV is positive and reject it if the NPV is negative. This is because the NPV is a measure of the net present value of the project's expected cash flows, taking into account the time value of money. A positive NPV indicates that the project will generate more cash than the initial investment, while a negative NPV indicates the opposite. Therefore, accepting projects with a positive NPV maximizes the value of the firm, while rejecting those with a negative NPV avoids value destruction.

Assume a Project Has Normal Cash Flows