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Analyst at tabby fur storage predict that the net present value of a proposed new $5 million warehouse is $2 million. The cost of capital
Analyst at tabby fur storage predict that the net present value of a proposed new $5 million warehouse is $2 million. The cost of capital used to compute the NPV is 8% how should these findings be interpreted
- Although NPV is positive its value is too low for such a large expenditure as as a result the project should be rejected
- The project does not meet the acceptance criteria of the NPV method and should be rejected
- The project should be rejected because the NPV is less than the cost of the warehouse
- The project should be excepted because it will add value to the firm
- More information such as the payback period should be evaluated since the reliance on only one capital budgeting technique should be discouraged
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