Question

A project would normally be undertaken if its net present value is:

a. Exactly the same as the NPV of existing projects

b. Positive

c. Zero

d. Negative

Answer 1

Answer:

option b

Explanation:

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Answer 2

Answer:

The correct answer is option b. Positive

Explanation:

Net present value is known as NPV for short. As the name indicates, it refers to the net present worth or currency in a specific investment undertaken by managers and investors. It mentions the rate of cash on the interval of time in an investment.

The net present value(NPV) is estimated with the help of a formula

NPV = R/(1+i)^t

Where,

R = Net cash flow at time t

R = Net cash flow at time t i = discount rate

R = Net cash flow at time t i = discount rate t = cash flow time

It depends on the discount rate and if the discount rate is less then the NPV will be more. According to the theory of NPV, investing in a project whose NPV is greater than zero would consequently increase the profit of an organisation.

Project might be deleted if its NPV is negative and also neutral due to the inefficiency of increasing company's outcome.

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