To discuss: On a project that does not have a positive
Introduction:
Net present value (NPV) refers to the current discounted value of the future cash flows. The company should accept the project, if the net present value is positive or greater than zero and vice-versa. If there are two mutually exclusive projects, then the company has to select the project that has higher net present value.
Answer to Problem 11.1CTF
The potential of believing that a particular project indicates a positive NPV when the project does not indicate a positive NPV is referred to as Negative NPV.
Explanation of Solution
The NPV of the project is the present value of all cash flows of a company’s project. In this form of cash flows, the
A particular project is accepted at the time when the project specifies a positive NPV. In case, a particular project does not point out a positive NPV, that particular project has to be rejected by the company.
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Chapter 11 Solutions
Fundamentals of Corporate Finance
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