Which of the following statements regarding Net Present Value (NPV)is incorrect?
A) The NPV represents the value of the project in terms of cash today.
B) Good projects will have a positive NPV.
C) The NPV of a project is the difference between the present value of its benefits and the present value of its costs.
D) When faced with a set of alternatives, choose the one with the lowest NPV in order to minimize the present value of costs.

Question

Quizplus · Accepted Answer

Choice D is incorrect as it suggests choosing the option with the lowest NPV, which would actually minimize the present value of benefits rather than costs. The correct approach is to choose the option with the highest NPV, as this represents the most value in terms of cash today.

Which of the Following Statements Regarding Net Present Value (NPV)is