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negative or positive Net present value for a company means?

negative or positive Net present value for a company means?
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Answer #1

Net present value is the difference between present value of cash inflows and present value of cash outflows over a period of time. It is used to analyse the investment project.

Positive net present value indicates that discounted projected earnings generated by the project exceeds the costs of the project. This type of investment project should be accepted.

Negative net present value indicates that cost of the project exceeds the discounted projected earnings by the project. This type of project should be rejected.

This method use in capital budgeting. It is used by company to evaluate the viability of the project whether it is profitable for the company or not. Further, it helps to reduce the unnecessary costs to be incurred on the project.

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