The net present value (NPV) rule can be best stated as:
A) An investment should be accepted if, and only if, the NPV is exactly equal to zero.
B) An investment should be rejected if the NPV is positive and accepted if it is negative.
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) An investment should be accepted if it equals its depreciation value.

Question

Quizplus · Accepted Answer

The NPV rule states that an investment is considered favorable and should be accepted if its NPV is positive, indicating that the present value of its cash inflows exceeds the present value of its cash outflows. Conversely, if the NPV is negative, the investment should be rejected.

The Net Present Value (NPV) Rule Can Be Best Stated