MANAGEMENT

Detailed explanation-1: -An investment with a negative NPV will result in a net loss. This concept is the basis for the net present value rule, which says that only investments with a positive NPV should be considered. NPV can be calculated using tables, spreadsheets (for example, Excel), or financial calculators.

Detailed explanation-2: -And, according to the authors, a project with a negative NPV leads to maximized shareholder value. In the second situation, the authors point out that some projects may have negative fundamental (intrinsic) value when valuated by the market (diversified owners) because of their higher expected rate of return.

Detailed explanation-3: -NPV is the sum of all the discounted future cash flows. Because of its simplicity, NPV is a useful tool to determine whether a project or investment will result in a net profit or a loss. A positive NPV results in profit, while a negative NPV results in a loss.

Detailed explanation-4: -The answer is d. increasing the project’s initial cost at time zero. The net present value is calculated by subtracting the initial cost of an investment from the discounted value of its cash flows. Therefore, if we increase the initial expense, the net present value will be reduced.