Final answer:
A project with a positive net present value is acceptable, indicating potential profitability; a negative net present value suggests that the project is unacceptable as it may not cover the investment and required returns.
Step-by-step explanation:
A project with a positive net present value is acceptable because it indicates that the project is expected to generate more cash than the cost of the investment, leading to a profit. Conversely, a project with a negative net present value is unacceptable since it suggests that the project's cash flows are insufficient to cover the initial investment and the required rate of return, resulting in a potential loss.
Net Present Value (NPV) is a financial metric used for capital budgeting to assess the profitability of an investment. When the NPV is positive, it implies that the expected rate of return exceeds the cost of capital, which justifies proceeding with the project. When it is negative, the project would not meet the basic financial criteria and should typically be rejected unless there are strategic reasons to proceed.