An independent project should be accepted if it
A) produces a net present value that is greater than or equal to zero.
B) produces a net present value that is greater than the equivalent IRR.
C) has only one sign reversal.
D) produces a profitability index greater than or equal to zero.

Question

Quizplus · Accepted Answer

A project should be accepted if its net present value is greater than or equal to zero. This means the project is expected to generate positive cash flows that are worth more than the initial investment, when discounted by the project's cost of capital. A positive net present value indicates that the project is creating value for the company and the shareholders, and should be accepted. Choices B, C, and D are not necessarily sufficient criteria for accepting a project, as they do not take into account the time value of money or the overall profitability of the project.

An Independent Project Should Be Accepted If It