CIMA BA2 · Chapter 12 · Question 9 of 13
Using the net present value method, when should an independent project be accepted?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) When its NPV at the cost of capital is positive
Explanation
A positive NPV means the project's cash inflows, discounted at the cost of capital, exceed the outflows, so it increases shareholder wealth. Undiscounted comparisons ignore the time value of money.
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