Practice Problem – NPV

Practice Question

Cases in Finance
Capital Budgeting
NPV
True or False

If a project has a positive NPV, it should be accepted regardless of its IRR.

Answer +
TRUE
Step-by-step solutions +
According to the NPV rule, a project should be accepted if its Net Present Value is greater than zero. This means the project is expected to generate more value than its cost. While IRR (Internal Rate of Return) can offer insight into project profitability, it can be misleading in some cases—especially for mutually exclusive projects or when cash flows are non-conventional. Therefore, NPV is the more reliable decision metric.