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## Should you invest in a negative NPV?

The net present value rule is the idea that company managers and investors should only invest in projects or engage in transactions that have a positive net present value (NPV). They should **avoid investing in projects that have** a negative net present value. It is a logical outgrowth of net present value theory.

## Why is negative NPV good?

A positive NPV indicates that a project or investment is profitable when discounting the cash flows by a certain discount rate, whereas, a negative NPV indicates **that a project or investment is unprofitable**.

## What happens if NPV is negative?

If NPV is negative then it means that **you’re paying more than what the asset is worth**. Zero NPV. If NPV is zero then it means you’re paying exactly what the asset is worth.

## Should a firm invest in projects with a NPV equal to $0?

Should a firm invest in projects with NPV = $0? IF a project’s NPV is 0, accepting the project **will neither** increase shareholders’ wealth nor destroy shareholders’ wealth, so the firm will be indifferent between accepting or rejecting the project.

## Why should companies invest in positive NPV projects?

The concept of Net Present Value (NPV) is a widely accepted tool for verification of financial rationality of planned investment projects. Projects with positive NPV **increase a company’s value**. … When there are no such investments within reach, the company should pay dividends to its owners.

## Why we accept projects with the positive NPV?

We accept projects with a positive NPV because it means that: **We have recovered all our costs**. … Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. If a project’s NPV is less than zero, then its IRR must be less than the WACC.

## Can a negative NPV have a positive IRR?

**A projects IRR can be positive even if the NPV is negative**…