If the net present value of a project is greater than zero,then the:
A) project cannot be carried out as the cash outflow is too high.
B) present value of cash outflows is higher than present value of cash inflow.
C) project will require 5 years to break even.
D) project generates wealth.

Question

Quizplus · Accepted Answer

If the net present value (NPV) of a project is greater than zero, it means that the present value of cash inflows exceeds the present value of cash outflows. This indicates that the project generates wealth and is profitable. Therefore, option D is the correct choice. Option A is incorrect as a positive NPV suggests that there is enough cash inflow to cover the outflow. Option B is incorrect as it is the opposite of what a positive NPV indicates. Option C is also incorrect as there is no information on the time period required to break even.

If the Net Present Value of a Project Is Greater