What does a positive net present value (NPV) indicate for investment decisions?

A positive net present value (NPV) indicates that a project is expected to generate value for the company. This means that the discounted cash inflows from the project exceed the discounted cash outflows, leading to a net gain. When evaluating investment opportunities, a positive NPV implies that the project is anticipated to contribute positively to the overall wealth of the firm. This is aligned with the goal of maximizing shareholder value.

Investors and decision-makers typically prefer projects with a positive NPV because they add to the company’s earnings and profitability, suggesting that the investment is worthwhile. In general, projects with positive NPV are considered to create value and are likely to be accepted in investment decisions, while those with negative NPV would likely be rejected as they would detract from the company's financial standing.