Question

A project with a negative net present value indicates that?

Answer 1

Net Present value refers to the difference between the present value of cash inflows and present value of cash outflows. Negative net present value indicates that the project provides less return than the discount rate due to which it has negative net present value. Project with net present value should not be accepted as it will not be beneficial for the company considering the time value of the money. Only projects with psoitive net present value should be accepted and negative net present value projects should not be accepted. In negative net present value present value of cash inflows are less than the present value of cash outflows. So we should not accept negative net present value projects.