Asked by Allysa Restaino on Jun 01, 2024
Verified
If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.
Net Present Value
A calculation that determines the current value of a series of future cash flows, discounting them by a specified rate to evaluate investments or projects.
Present Value
The present value of a future amount of money or series of cash flows, based on a particular rate of return.
Future Cash Inflows
Projected cash earnings from investments, operations, or financial instruments over a specified future period.
- Acquire knowledge on how net present value impacts the evaluation of capital investment proposals.
Verified Answer
ZK
Zybrea KnightJun 01, 2024
Final Answer :
True
Explanation :
If the net present value of a proposal is negative, it means that the present value of the expected cash inflows is less than the amount invested. This indicates that the proposal is not likely to generate sufficient returns to cover the investment and should be rejected.
Learning Objectives
- Acquire knowledge on how net present value impacts the evaluation of capital investment proposals.