Question

A firm can accept a project with a net present value of zero because​ ________. A. the project would enhance the wealth of the​ firm's owners B. the project would maintain the wealth of the​ firm's owners C. the project would enhance the earnings of the firm D. the project would maintain the earnings of the firm

Answer 1

B. the project would maintain the wealth of the​ firm's owners

Step-by-step explanation:

Net present value method: In this method, the initial investment is subtracted from the discounted present value cash inflows. If the amount comes in positive than the project is beneficial for the company otherwise not.

In mathematically,

= Present value of all yearly cash inflows after applying discount factor - initial investment

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

Since the net present value is zero which result in no profit or no loss as we cant take any decision whether project is accepted or not so it maintain the firm owners wealth