Question

When analyzing the purchase of a capital asset, the Net Present Value was equal to $500, but the Internal Rate of Return and the Payback Period were both below preferred levels. How should you proceed

Answer 1

Accept the opportunity because the NPV is above zero.

Step-by-step explanation:

The net present value is the value which shows the difference between the initial cost or investment and the present value of all cash flows

At the time of purchasing of capital asset, the net present value is equivalent to $500 but at the same time the internal rate of return & payback period would below the preferred level

So in this situation, the opportunity should be accepted as the net present value is above the zero