- This topic has 3 replies, 2 voices, and was last updated 1 year ago by
.
- Posts
Sir, after calculating the expected net present value, how do we comment on its financial acceptability? Should the project be accepted if EPNV is positive?
As always, if the NPV is positive we accept and if negative reject.
However if this was a section C question we would always write (as again I explain in my lectures) that it depends on how certain we are as to the accuracy of the estimates used. This is even more important if we are using an expected NPV because we already know that the cash flows could be lower and might result in a negative NPV – the actual NPV will never be the expected NPV because the cash flows will never be the expected flows. This might turn out to be higher but they might turn out to be lower.
So we don’t write yes or no but instead the reservations of using the expected net present value?
- You must be logged in to reply to this topic.