The NPV criterion states that an investment project is profitable when its NPV is ______ and unprofitable when its NPV is ______.
A) Positive, positive
B) Positive, negative
C) Negative, positive
D) Negative, negative

Question

Quizplus · Accepted Answer

The NPV criterion states that an investment project is profitable when its NPV is positive and unprofitable when its NPV is negative. Therefore, only option B correctly represents the NPV criterion, where a positive NPV indicates a profitable investment and a negative NPV indicates an unprofitable investment. Option A is incorrect because a positive NPV is profitable, not both a positive and negative NPV. Option C and D are also incorrect because they suggest that a positive NPV is unprofitable, which goes against the definition of the NPV criterion.

The NPV Criterion States That an Investment Project Is Profitable