The investment decision rule for net present value calculations is to invest:

Question

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The net present value (NPV) calculation helps to determine whether investment in a project generates a positive return after considering the time value of money. The investment decision rule for NPV is to invest in the project with the highest positive NPV value. This indicates that the project generates more cash flows in the present value than the initial investment, and thus creates shareholder value. Choosing the project with the lowest NPV, or either the lowest or highest discount rate, may result in accepting a project that generates less return or rejecting a project that generates more value. Therefore, the best choice is to invest in the project with the highest positive NPV.

The Investment Decision Rule for Net Present Value Calculations Is