What does NPV stand for and what does a positive NPV indicate?
- A Net Present Value; the project is expected to add value
- B Nominal Profit Value; the project is profitable in nominal terms
- C Net Payable Value; the amount owed to lenders
- D New Portfolio Value; the revised value of holdings
Answer
Net Present Value; the project is expected to add value
NPV discounts all future cash flows at the required rate of return and subtracts the initial outlay. A positive NPV means the project earns more than its cost of capital.
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