For a proposed purchase to be acceptable,the PV of the future cash flows must:

Question

Quizplus · Accepted Answer

The PV of the future cash flows must equal or exceed the cost of the purchase in order for it to be acceptable. This ensures that the investment will generate sufficient returns to cover the cost of the purchase and provide a positive rate of return. Option A is incorrect because a positive NPV does not guarantee acceptability if it is less than the cost of the purchase. Option B is incorrect because if the PV of future cash flows is less than the cost of the purchase, it means that the investment will result in a negative rate of return. Option D is incorrect because the PV of future cash flows does not have to equal the purchase price, only exceed it. Option E is incorrect because a positive NPV at all discount rates is not necessary for acceptability, but the NPV must be positive at the relevant discount rate.

For a Proposed Purchase to Be Acceptable,the PV of the Future