If a project's NPV is positive, what does that indicate?

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Multiple Choice

If a project's NPV is positive, what does that indicate?

A positive NPV means the value created by the project, after discounting future cash flows back to present value, exceeds the cost of those cash flows. In practical terms, the discounted inflows are greater than the discounted outflows, so the project earns more than the required return and adds value to the firm. It doesn’t speak to profit certainty, and it doesn’t imply the inflows and outflows are equal (that would be zero NPV). It also isn’t a negative NPV—that would be the opposite.

A positive NPV means the value created by the project, after discounting future cash flows back to present value, exceeds the cost of those cash flows. In practical terms, the discounted inflows are greater than the discounted outflows, so the project earns more than the required return and adds value to the firm. It doesn’t speak to profit certainty, and it doesn’t imply the inflows and outflows are equal (that would be zero NPV). It also isn’t a negative NPV—that would be the opposite.

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