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Homework answers / question archive / Provide two different reasons why a project's NPV could be negative
Provide two different reasons why a project's NPV could be negative. You must provide two different reasons in order to earn full credit on this question.
ANSWER: -
NPV MEANS "NET PRESENT VALUE"
NPV = PRESENT VALUE OF INFLOW - PRESENT VALUE OF OUTFLOW.
FOLLOWING ARE THE REASONS WHY NPV IS NEGATIVE
1. THE VALUE OF OUTFLOW IS GREATER THAN VALUE OF INFLOW.
2. WHEN THE EXPECTED RETURN (IRR) FROM THE PROJECT FALLS BELOW (is lower than) THE REQUIRED RETURN (r) FROM THE PROJECT
