A net present value of zero ($0) signifies that the project's cash inflows will (1) be sufficient to recover the project's costs and (2) earn a return equal to the project's opportunity cost of capital. True / False.

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Business

Trevor Christensen

26 July, 02:09

A net present value of zero ($0) signifies that the project's cash inflows will (1) be sufficient to recover the project's costs and (2) earn a return equal to the project's opportunity cost of capital. True / False.

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Javion Ramsey · Answer 1

The statement " A net present value of zero ($0) signifies that the project's cash inflows will (1) be sufficient to recover the project's costs and (2) earn a return equal to the project's opportunity cost of capital " is TRUE

Explanation:

The net present value (NPV) measures the difference between the actual cash flow value and the current cash outflow value over time.

NPV is used for the study of the feasibility of a project or operation in capital budgeting and financial planning.

The discrepancy between the current value of cash flows and the existing price of cash outflows is measured over a cycle. As the name suggests, the net present value simply discounts the balances at a fixed rate, regardless of the current currency inflows and outflows.