Which one of the following statements is most likely to be correct for a project in which the NPV is negative when the cash inflows are based on net income?
A) NPV may turn positive after adjusting for depreciation expense.
B) NPV should be calculated with pretax cash flows rather than net income.
C) NPV has probably been overestimated.
D)The project should be rejected or abandoned.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces net income but does not affect cash flow. Adjusting for depreciation can increase the cash inflows used in the NPV calculation, potentially turning a negative NPV positive.

Which One of the Following Statements Is Most Likely to Be