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

A manager of the engineering department of manchester university

Without further calculations, it can be determined that the NPV is negative if the minimum desired rate is 12%. This is because the net present value of a project is calculated by subtracting all future cash flows from the initial investment. If the sum of all future cash flows, discounted at a certain rate, is lower than the initial investment then this means that the NPV will be negative. Therefore, in this case since 12% exceeds the average return on investments for similar projects (10%), any amount below 12% would result in a negative NPV.

It should also be noted that while a positive NPV indicates that an investment has potential to yield above-average returns and thus should be pursued, a negative NPV does not necessarily mean that an investment should not be considered as other factors such as strategic positioning or brand recognition may still make it worthwhile.