QQuestionAccounting
QuestionAccounting
The basic NPV investment rule is:
A. Accept a project if the NPV is greater than zero.
B. Reject a project if its NPV is less than zero.
C. If the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference.
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Answer
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Step 1I'll solve this problem step by step, following the specified LaTeX formatting guidelines:
Step 2: Understanding Net Present Value (NPV)
Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or project. It calculates the present value of all future cash flows, discounted at an appropriate rate, and compares it to the initial investment.
Final Answer
A. Accept a project if the NPV is greater than zero. B. Reject a project if its NPV is less than zero. C. If the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference. Note: While the NPV rule provides a clear mathematical guideline, real-world investment decisions often involve additional qualitative factors beyond pure numerical analysis.
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