Suppose you determine that the NPV of a project is $1,525,855. What does that mean?
A) If they are mutually exclusive, this project should be preferred to one that has an NPV of $850,000.
B) The project would add value to the firm.
C) The present value of positive cash flows exceeds the present value of negative cash flows.
D) All of the above

Question

Quizplus · Accepted Answer

The NPV of $1,525,855 indicates that the project would add value to the firm as the present value of the positive cash flows exceeds the present value of negative cash flows. Additionally, if there is another project that is mutually exclusive, the preferred project should be the one with a higher NPV, which in this case is $1,525,855 compared to $850,000.

Suppose You Determine That the NPV of a Project Is