Option #1 The NPV decision rule is the golden rule of capital budgeting. Accepting projects with a positive NPV will add value to a firm. Rejecting projects with a negative NPV will prevent a loss of value. Why is it that some companies accept projects with a "negative NPV". Explain. General rule says, company should accept project with positive NVP, in case there are multiple opportunities, company goes with the highest positive NPV. However, there are times when entities make investments in projects which have zero or negative NPV. If done in a way which helps in growth of company, not in nancial but other ways, companies go ahead with it. Some investments like improving safety standards, repairing roof, complying with environmental regulations, etc. Investments like these are hard to quantify. Investments like this with negative NPV have to be made to avoid something worse. Avoiding environmental regulations may lead up to legal trouble, unrepaired roof can collapse leading to total shut down. Such situations leave no choice to go with projects with negative NPV, but through analysis manager can choose the least negative NPV Proiect