If the net present value of an investment project is positive then the:
A) project would be unacceptable under the internal rate of return method
B) project would be acceptable under the payback method
C) project's rate of return is greater than the firm's cost of capital
D) all of the above are correct

Question

Quizplus · Accepted Answer

A positive net present value indicates that the investment is generating returns that are greater than the cost of funding the project. This implies that the project's rate of return is higher than the firm's cost of capital. Option A is incorrect because if the net present value is positive, then the internal rate of return must be greater than the firm's cost of capital, making the project acceptable. Option B is incorrect because the payback method does not consider the time value of money and is, therefore, a poor measure of profitability.

If the Net Present Value of an Investment Project Is