A project with a positive NPV may have a negative NPV when flotation costs are considered.

Name: A project with a positive NPV may have a negative NPV when flotation costs are considered.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is because flotation costs are the expenses associated with issuing new securities, such as underwriting fees, legal fees, and printing costs, which reduce the amount of money available for investing in the project. As a result, the initial cash outflow is greater, which may reduce the NPV of the project.

A Project with a Positive NPV May Have a Negative