A company has unlimited funds to invest at its discount rate. The company should invest in...

A company has unlimited funds to invest at its discount rate. The company should invest in all projects having:

A net present value less than zero

A net present value greater than zero

A net present value equal to zero

Both B and C

Solutions

Expert Solution

A company should invest in only those projects whose net present value which is the difference between the future cash flow and initial investment is positive. This gives the company an idea regarding which of the projects will give positive income and negative losses to the company.

Moreover zero net present value means that the company is not earning anything from the project because the intial investment = future cash flow.

Therefore if the company has unlimited funds it should invest in all projects having positive net present value.

Therefore the correct option is B ie net present value greater than zero.

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ekkarill92 answered 1 year ago

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