A positive NPV means the return from a project exceeds the ____ cost of capital-the return available by investing the capital elsewhere.
A) fixed
B) variable
C) alternative
D) opportunity

Question

Quizplus · Accepted Answer

NPV stands for Net Present Value which measures the present value of all cash inflows and outflows of a project. A positive NPV means that the present value of cash inflows is greater than the present value of cash outflows. Therefore, the return from the project is higher than the opportunity cost of capital - the return that can be earned by investing the same amount of capital in alternative projects or opportunities. Hence, the correct answer is option D - opportunity cost.

A Positive NPV Means the Return from a Project Exceeds