A firm that uses a discount rate of 11 percent calculated the net present value of a project and found it to be $123, so

Question

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Since the net present value (NPV) of the project is positive ($123), it indicates that the project's returns exceed its costs when discounted at the firm's cost of capital (11 percent). This means the project is expected to add value to the firm, and therefore, the firm should implement the project. Options A and B are incorrect interpretations of a positive NPV.

A Firm That Uses a Discount Rate of 11 Percent