Projects with a Zero or Positive Net Present Value (NPV)

question 85

Multiple Choice

Projects with a zero or positive net present value (NPV) are accepted using the net present value method. Why is this so?

• A) Because a non-negative NPV ensures the company will be profitable.
• B) Because the company will have the relevant cash flow to pay its debts as, and when, they fall due.
• C) Because the return is at least equal to the cost of capital.
• D) Because a non-negative NPV ensures the company will be profitable AND because the company will have the relevant cash flow to pay its debts as, and when, they fall due.

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Definitions:

Dimensions

Aspects or features that can be measured or used to define the characteristics of something.

Preferred Solution

The most favored or desirable resolution to a problem or issue among several alternatives.

Escalation of Commitment

A decision-making error in which individuals or organizations continue a course of action despite facing negative outcomes or feedback.

Preferences

Individual choices or inclinations regarding various options, based on personal likes, dislikes, values, or interests.