If the net present value of an investment project is positive, then the ____.
A) project would be unacceptable under the internal rate of return method
B) project would be acceptable under the payback method
C) project's rate of return is greater than the firm's cost of capital
D) All of these are correct

Question

Quizplus · Accepted Answer

A positive net present value indicates that the present value of cash inflows from the project exceeds the initial investment. This means that the project is generating a return that is greater than the firm's cost of capital, making it a viable investment option. Choice A is incorrect as a positive NPV means that the IRR is greater than the required rate of return. Choice B is incorrect as the payback method does not consider the time value of money or the profitability of a project, and only focuses on the time it takes to recover the initial investment.

If the Net Present Value of an Investment Project Is