According to the net present value rule, an investment in a project should be made if the:
A)net present value is greater than the cost of investment.
B)net present value is greater than the present value of cash flows.
C)net present value is positive.
D)net present value is negative.

Question

Quizplus · Accepted Answer

The net present value (NPV) rule states that an investment in a project should be made if the NPV is positive. This means that the present value of the expected cash inflows from the project is greater than the present value of the expected cash outflows. A positive NPV indicates that the project is expected to generate more cash inflows than outflows, creating value for the investor. Therefore, choice C is the correct answer.

According to the Net Present Value Rule, an Investment in a Project