Question

Which of the following statement is correct? a. A firm should never accept the independent projects...

Which of the following statement is correct?

a. A firm should never accept the independent projects having NPVs greater than zero.

b. All the answers are incorrect.

c. Because the net present value method does not factor in the time value of money, nor the cash flows after the payback period, its usefulness is limited.

d. Mutually exclusive projects are the projects that do not have the same task and therefore they do not compete with each other.

e. The Net Present Value Method (NPV) is the contribution (positive or negative) to the dollar value of the firm made by the project.

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Answer #1

A firm should always accept the independent projects having NPVs greater than zero. Net present value consider time value of money and consider whole period of cash flow which is not available with payback period and discounted payback period methods. Mutually exclusive project is type of project in which only one project at given time can be selected among more than one project.

The Net Present Value Method (NPV) is the contribution (positive or negative) to the dollar value of the firm made by the project.

Option (E) is correct answer.

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