Author Question: Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million ... (Read 26 times)

james0929 · **on:** Apr 25, 2021

Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million. How should these findings be interpreted?
◦ Although NPV is positive, its value is too low for such a large expenditure and as a result, the project should be rejected.
◦ The project should be rejected because the NPV is less than the cost of the warehouse.
◦ The project should be accepted because it will add value to the firm.
◦ More information such as the payback period should be evaluated since the reliance on only one capital budgeting technique should be discouraged.
◦ The project does not meet the acceptance criteria of the NPV method and should be rejected.

jomama · **Reply #1 on:** Apr 25, 2021

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