The NPV of an initial investment of $1,500,000 with a 10% required rate of return over 10 years is calculated at $120,000. What should the company do?
A) Invest - the NPV is greater than $0.
B) Not invest - the NPV is less than the 10% stated.
C) Find a way to reduce the initial investment to $1,200,000 and still yield the same amount.
D) None of the above

Question

Quizplus · Accepted Answer

The NPV is positive, which means the investment will bring in more cash in than the required rate of return. Therefore, the company should invest.

The NPV of an Initial Investment of $1,500,000 with a 10