To accept a capital project when using NPV,
A) the project NPV should be less than zero.
B) the project NPV should be greater than zero.
C) Both a and b
D) None of the above

Question

Quizplus · Accepted Answer

NPV is calculated by subtracting the present value of cash outflows from the present value of cash inflows. A positive NPV indicates that the project is expected to generate more cash inflows than cash outflows and hence increases the value of the firm. Therefore, to accept a capital project using NPV, the project NPV should be greater than zero.

To Accept a Capital Project When Using NPV