Danielle, the regional manager of CDz Music Stores, is trying to determine if the store should invest in a new computerized inventory tracking system. Using financial analysis, she can decide that the investment is desirable if:
A) the present value of the expected future cash flows from the project is less than the cost of the project.
B) its computed Net Present Value is positive.
C) its computed Net Present Value is negative.
D) the firm has enough cash to make the purchase without having to arrange additional financing.

Question

Quizplus · Accepted Answer

The computed Net Present Value (NPV) being positive is the correct indicator for an investment to be desirable. NPV helps in determining the profitability of the investment by considering the present value of expected future cash flows and subtracting the cost of the investment. A positive NPV indicates that the investment is worth making as it will generate more cash inflows than the outflows. If the NPV is negative, the investment should be avoided.

Danielle, the Regional Manager of CDz Music Stores, Is Trying