A firm should accept projects with positive net present values primarily because those projects will:
A)also have positive AARs.
B)return the firm's initial cash outlay within one year.
C)create value for the firm's current stockholders.
D)produce only positive cash flows after the initial investment period.
E)increase the current liquidity of the firm.

Question

Quizplus · Accepted Answer

Accepting projects with positive net present values means that the cash inflows are higher than the cash outflows, creating value for the firm. AAR, initial cash outlay, and liquidity are not the main considerations for accepting projects with positive net present values. Positive cash flows after the initial investment period are a good indication, but not the primary reason to accept projects with positive net present values.

A Firm Should Accept Projects with Positive Net Present Values