To determine whether an investment makes sense a business will compute the net present value and if the result is
A)negative they will make the investment.
B)positive they will make the investment.
C)positive they will not make the investment unless the interest rate rises.
D)positive they will not make the investment regardless of the change in interest rates.

Question

Quizplus · Accepted Answer

A positive net present value indicates that the investment is expected to generate more value than its total cost, taking into account the time value of money. Therefore, it makes sense for the business to make the investment. A negative net present value would mean that the investment is expected to produce less value than its cost, which would not be a good use of the business's resources. Choice C and D are incorrect because a positive net present value means that the investment is desirable regardless of changes in interest rates.

To Determine Whether an Investment Makes Sense a Business Will