Question

under the net present value criterion, a project is approved if

A.) its net present value is positive and funds are unlimited

b.) its net present value is negative

c.) the funds are unlimited

d.) its net present value is positive

Answer 1

Net Present Value is the difference between Present Value of cash inflow and Present Value of cash Outflow which occurs as a result of proposed or undertaken of investment in projects, Machinery, Equipment's etc. Net Present Value Technique is used in determining whether to undertake or investment in a project, Machinery etc. If Net Present Value is Positive, the project would be acceptable. Net Present Value is said to be Positive when Present Value of cash Inflow are more than the Present Value of cash Outflow. If Net Present Value is Negative, the project would be rejected. Net Present Value is said to be Negative when Present Value of cash Inflow are less than the Present Value of cash Outflow. Net Present Value Technique considered only Results of Positive or Negative to determine whether to invest or reject but it doesn't consider the Availability of funds. From the above summary we can conclude that OPTION D IS CORRECT

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