Suppose the minimum desired rate was 12%. Without further calculations, determine whether the NPV is positive or negative Explain.

The manager for the engineering department at manchester university

If the desired minimum rate of 12% is used, the NPV can be calculated without further calculation. Because the net present value for a project can be calculated simply by subtracting future cash flows from its initial investment, this is called the “net present value”. If all future cash flow, which is discounted at a specific rate, exceeds the initial investment, then the NPV will become negative. In this example, since the average return of investments for similar projects is 12%, any amount lower than that would lead to a negative net present value.

Noting that a positive net present value (NPV) indicates an investment’s potential for above-average returns, does not automatically mean it should be avoided. There are other factors that may be worth considering such as brand recognition and strategic positioning.