The Net Present Value rule implies that we should compare a project's net present value (NPV) to zero.

Question

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The Net Present Value rule states that if the NPV of a project is positive, the project is expected to be profitable, and if it is negative, then the project is expected to result in a net loss. Therefore, we should compare the NPV to zero, as a positive NPV means that the project will generate a return greater than the required rate of return, and a negative NPV implies that the project will not meet the required rate of return.

The Net Present Value Rule Implies That We Should Compare