The Net Present Value approach to investment results in an investment being undertaken only if
A) its net present value is positive.
B) its net present value is zero.
C) it has positive cash flow.
D) its internal rate of return equals the rate of interest.

Question

Quizplus · Accepted Answer

The Net Present Value approach is based on the principle that a project or investment should only be undertaken if its present value (the value of future cash flows discounted to present-day) is greater than the cost of the investment. Therefore, an investment should only be undertaken if its net present value is positive. Choices B, C, and D are incorrect because they do not fully capture the criteria for the Net Present Value approach.

The Net Present Value Approach to Investment Results in an Investment