What is the key reason why a positive NPV project should be accepted?
A)The project is expected to increase shareholder value.
B)The present value of the expected cash flows equals the project's cost.
C)The project will produce positive cash flows in the future.
D)The project's payback will be positive during its life.
E)The project's PI will be less than 1,which indicates acceptance.

Question

Quizplus · Accepted Answer

The key reason why a positive NPV project should be accepted is that it is expected to increase shareholder value. NPV represents the present value of expected cash inflows minus the present value of expected cash outflows, discounted at the appropriate cost of capital. A positive NPV indicates that the project's expected cash inflows, when discounted at the appropriate cost of capital, will be higher than its expected cash outflows, resulting in increased shareholder wealth. Therefore, accepting a positive NPV project is in the best interests of shareholders.

What Is the Key Reason Why a Positive NPV Project