When using the NPV method for a particular investment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then:

Question

Quizplus · Accepted Answer

If the present value of all cash inflows is greater than the present value of all cash outflows, it means that the investment is generating a positive net present value, which indicates that the investment is profitable and provides an actual rate of return greater than the discount rate. Therefore, option B is the correct answer. Option A and D are incorrect as they suggest that the discount rate used was incorrect, which may not necessarily be true. Option C is also incorrect as it suggests that the actual rate of return is equal to the discount rate, which is not necessarily the case.

When Using the NPV Method for a Particular Investment Decision