Question

You are presented with the following information on the net present value (NPV) of several potential projects. Which project is your BEST choice given this information?

Project B with an NPV of U.S. $120,000

All of these, the NPV is about the same.

Project A with an NPV of U.S. $95,000

Project D with an NPV of U.S. - $150,000

Project C with an NPV of U.S. - $120,000

Answer 1

The best project choice based on NPV is Project B with the highest positive NPV of U.S. $120,000, indicating the greatest potential for value increase.

Step-by-step explanation:

When evaluating which project to choose based on Net Present Value (NPV), the best option is typically the one with the highest positive NPV, as this represents the greatest potential increase in value. NPVs with negative values indicate a reduction in value, thus they should generally be avoided. In this case:

• Project B has an NPV of U.S. $120,000
• Project A has an NPV of U.S. $95,000
• Project D has an NPV of U.S. - $150,000
• Project C has an NPV of U.S. - $120,000

Project B would be the BEST choice given this information because it has the highest positive NPV, suggesting the greatest potential for value creation over the life of the project.