Which of the following options is the CORRECT interpretation of a project appraisal that returns a Net Present Value of £3,500?
A) The project earns £3,500 more than the discount rate
B) The project earns £3,500 less than the discount rate
C) The project has a total cost of £3,500
D) The project has a total profit of £3,500

Question

Quizplus · Accepted Answer

A Net Present Value (NPV) of £3,500 indicates that the project is expected to generate £3,500 more than its cost, taking into account the time value of money at the project's discount rate. It does not directly relate to earning more than the discount rate itself, but rather it means the project's cash flows, discounted back to their present value, exceed the initial investment by £3,500.

Which of the Following Options Is the CORRECT Interpretation of a Project