ObjectiveMcq
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Which of the following statements about Net Present Value (NPV) is correct?
Correct Answer: C — NPV is the difference between the present value of cash inflows and the initial investment
The correct answer is C: NPV is the difference between the present value of cash inflows and the initial investment.
NPV accounts for the time value of money by discounting future cash flows. A positive NPV indicates the project adds value and should be accepted; a negative NPV means it should be rejected. NPV and IRR may occasionally give conflicting decisions when evaluating mutually exclusive projects.