Final answer:
A positive net present value in an NPV analysis using a 10% required rate of return indicates that the investment opportunity's rate of return is higher than 10%.
Step-by-step explanation:
The accountant for Seaside Investors, Inc. (SII) applied net present value analysis to an investment opportunity using a 10% required rate of return. The analysis produced a positive net present value which means the investment opportunity will produce a rate of return that is higher than 10%.
The logic behind this is that the net present value (NPV) compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV is positive, it signifies that the projected earnings (in present dollars) from an investment are expected to exceed the anticipated costs (also in present dollars). This excess means that the investment's rate of return is greater than the discount rate used in the analysis (the required rate of return), which in this scenario is 10%. Therefore, when the NPV is positive, the actual return is higher than the desired rate of return.