Analysts at Tabby Fur Storage predict that the net present value of a proposed n

Question

Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million. How should these finding be interpreted?

A) Although NPV is positive, its value is too low for such a large expenditure and as a result, the project should be rejected.

B)The project should be rejected because the NPV is less than the cost of the warehouse.

C) More information such as the payback period should be evaluated since ther reliance on only one capital budgeting technique should be discouraged.

D) The project does not meet the acceptance critera of the NPV method and should be rejected.

Explanation / Answer

C) More information such as the payback period should be evaluated since ther reliance on only one capital budgeting technique should be discouraged.

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