Question

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.True / False.

Answer 1

Answer:

True

Explanation:

Net present value is the present value of after tax cash flows less the amount invested.

If there is a deficiency of the present value of future cash inflows over the amount to be invested, it means the NPV is negative and the project proposal should be rejected.