The primary reason that company projects with positive net present values are considered acceptable is that:
A) They create value for the owners of the ﬁrm.
B) The project's rate of return exceeds the rate of inﬂation.
C) They return the initial cash outlay within three years or less.
D) The required cash inﬂows exceed the actual cash inﬂows.
E) The investment's cost exceeds the present value of the cash inﬂows.

Question

Quizplus · Accepted Answer

The primary objective of any company is to create value for its owners or shareholders. Therefore, projects with positive net present values, which means the expected cash inflows from the project exceed the present value of its costs, are considered acceptable because they will create value for the owners of the firm. Options B, C, D, and E are incorrect because while they may be factors to consider in evaluating a project, they are not the primary reason that projects with positive net present values are acceptable.

The Primary Reason That Company Projects with Positive Net Present