Projects with a zero or positive net present value (NPV) are accepted using the net present value method. Why is this so?

A) Because a non-negative NPV ensures the company will be profitable.
B) Because the company will have the relevant cash flow to pay its debts as, and when, they fall due.
C) Because the return is at least equal to the cost of capital.
D) Because a non-negative NPV ensures the company will be profitable AND because the company will have the relevant cash flow to pay its debts as, and when, they fall due.

Question

Jaqueline Soriano de la rosa · Accepted Answer

Final Answer : C, Explanation :  A project with a zero or positive NPV indicates that the project's returns are at least equal to the cost of capital. This means the project is expected to generate enough returns to cover its initial investment and the required rate of return, making it a financially viable option.

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