Question

Assume you have completed a NPV Analysis determined a project is acceptable. Which change to your data could possibly cause a positive NPV to turn to turn into a negative NPV?

Answer 1

A change in variables such as cash inflows, cash outflows, discount rate, or project's cost can lead to a negative NPV in a project.

Step-by-step explanation:

In a NPV analysis, a change in any of the variables used to calculate the net present value can affect the outcome. The net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

If the change in data causes the cash inflows to decrease or the cash outflows to increase, it can result in a negative NPV. For example, if the project's expected cash inflows decrease or the discount rate increases, the NPV may turn negative.

Additionally, an increase in the initial investment or an increase in the project's cost can also lead to a negative NPV. It's important to carefully consider all the variables and assumptions used in the NPV calculation to accurately assess the financial viability of a project.