Assume the net present value method is used to evaluate investment opportunities.A manager is faced with several investments,but only has funding for one investment.Which investment should be chosen?
A) the investment with the lowest net present value
B) the investment with a net present value equal to zero
C) the investment with a negative net present value
D) the investment with the largest net present value

Question

Quizplus · Accepted Answer

The best choice is the investment with the largest net present value. This is because the net present value method assumes that investments with positive net present values will increase the value of the firm, while those with negative net present values will decrease the value. Therefore, choosing the investment with the largest net present value should provide the greatest increase in value to the firm.

Assume the Net Present Value Method Is Used to Evaluate