Question & Answer: how does the net present value decision rule relate to the primary goal of financial…..

The NPV rule states that a project should be accepted if the NPV is positive and rejected if theNPV is negative. This aligns with the goal of creating wealth for a firm’s shareholders as onlyprojects which create wealth are approved for acceptance. Managers are indifferent to projectswith zero NPVs, which is okay because such projects neither create nor destroy shareholder wealth