WK3.docx - 1 NPV According to the text the NPV rule states that\"An investment should be accepted if the NPV is positive and rejected if it is negative

WK3.docx - 1 NPV According to the text the NPV rule states...

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1. NPV According to the text, the NPV rule states that "An investment should be accepted if the NPV is positive and rejected if it is negative." What does an NPV of zero mean? If you were a decision- maker faced with a project with a zero NPV (or very close to zero) what would you do? Why? 2. FORECASTING ERROR (RISK) What is a "forecasting error"? Why is it important to the analysis of capital expenditure projects? The NVP is zero when the sum of the discounted cash flow equals the initial investment. This would basically be considered a breakeven. You don’t recognize a gain nor a loss if the NVP is zero. In the unlikely event that the NPV turned out to be exactly zero, we would be indifferent between taking the investment and not taking it. If I were faced with a project that would result in a zero NVP, I would research another possible project to see if the project provided an equal

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