For a capital investment project, a net present value (NPV) of $500 indicates that the:
A) Project's true or economic rate of return exceeds the hurdle (discount) rate.
B) Project's internal rate of return (IRR) is likely unacceptable.
C) Present value of cash outflows exceeds the present value of after-tax cash inflows.
D) Total cash outflows for the project are expected to be $500.
E) Internal rate of return (IRR) exceeds the accounting rate of return (ARR) on the project.

Question

Quizplus · Accepted Answer

A positive NPV of $500 indicates that the project's present value of cash inflows is greater than the present value of cash outflows, after accounting for a hurdle rate or discount rate. Therefore, the project is expected to generate a rate of return greater than the hurdle rate, which indicates that the project's true or economic rate of return exceeds the hurdle rate.

For a Capital Investment Project, a Net Present Value (NPV)