If the net present value of a project is positive then the:

Question

Quizplus · Accepted Answer

A positive net present value indicates that the project's estimated cash inflows exceed its estimated cash outflows, which is a good sign for an investment. Under the internal rate of return method, projects are accepted if the internal rate of return exceeds the firm's cost of capital, which is similar to choosing projects with positive net present values. The payback method only considers the time it takes to recoup the initial investment and does not factor in the project's profitability or cash flows beyond that point, so it is not a reliable method for investment decisions. Therefore, option C is the correct choice, as a positive net present value means the project's rate of return is greater than the firm's cost of capital.

If the Net Present Value of a Project Is Positive