Which of the following is the best expression of the net present value (NPV) acceptance criterion?
A) positive cash flows total greater than negative flows
B) number of positive cash flows exceeds negative
C) payback within one third the life of the project
D) NPV is greater than or equal to zero

Question

Quizplus · Accepted Answer

The NPV acceptance criterion compares the present value of cash inflows and outflows to determine the profitability of a project. A positive NPV indicates that the project is expected to generate more cash inflows than outflows over its life, and a negative NPV indicates the opposite. Therefore, choosing the option where NPV is greater than or equal to zero (D) is the best expression of the NPV acceptance criterion. Choices A, B, and C do not take into account the time value of money or the entire life of the project, and may lead to poor investment decisions.

Which of the Following Is the Best Expression of the Net