If the net present value for a project is zero or positive, this means that the:
A)project should be accepted
B)project should not be accepted
C)expected rate of return is below the required rate of return
D)Both A and C are correct.

Question

Quizplus · Accepted Answer

If the net present value of a project is zero or positive, it means that the project's expected cash inflows are greater than or equal to its expected cash outflows, discounted to the present at a required rate of return. This indicates that the project is generating a financial return that is at least as high as the required rate of return, or cost of capital, and therefore should be accepted. Choice B is incorrect because a positive net present value indicates the project should be accepted, not rejected. Choice C is incorrect because a positive net present value indicates that the expected rate of return is greater than the required rate of return, not lower. Choice D is incorrect because choice C is not correct.

If the Net Present Value for a Project Is Zero