Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics: Union Atlantic's capital budgeting manager has determined that the project's net present value is R7,008.According to this information, which of the following statements is correct?

Question

Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics:  Union Atlantic's capital budgeting manager has determined that the project's net present value is R7,008.According to this information, which of the following statements is correct?

Quizplus · Accepted Answer

Since the project's net present value is positive, it means that the present value of the project's cash inflows is greater than the present value of its cash outflows. Therefore, the project is expected to generate positive returns, which makes it a good investment opportunity for Union Atlantic. Thus, the project should be purchased by Union Atlantic. Statements A and B do not necessarily apply to this situation.

Union Atlantic Corporation, Which Has a Required Rate of Return