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When using the Net Present Value method, A project is acceptable if the present value of...

When using the Net Present Value method,

A project is acceptable if the present value of benefits equals the present value of outflows.

A project is acceptable if the present value of benefits exceeds a specified minimum value.

None of the answers provided is correct

A project is acceptable if the required rate of return on the project is equal to the cost of the firm’s capital.

Projects with positive net present values increase the value of the firm.

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Answer #1

Option E is correct. Projects with positive net present values increase the value of the firm.

The Firm which has positive NPV i.e. the firm is earning over and above what the Equity and Debt holders expects to receive as return. NPV is 0 when present Value of Benefits are equal to Present Value of Ouflows and at o NPV, the investor is neutral / indifferent regarding the project.

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