What does a Net Present Value (NPV) greater than 0 indicate?

A Net Present Value (NPV) greater than 0 indicates that the investment generates more value than the cost of the investment when considering the time value of money. This means that the cash inflows expected from the investment, discounted at the required rate of return, exceed the initial investment cost. Therefore, a positive NPV signifies that the investment meets or exceeds the required rate of return set for the project.

This is a key principle in capital budgeting and financial management as it guides decision-making. When evaluating potential investments, a positive NPV is generally seen as a signal to proceed with the investment, as it is likely to add value to the firm, contributing positively to overall financial performance. In contrast, if the NPV were zero, it would imply that the investment would break even, and an NPV less than zero would indicate a loss, implying that the investment should be avoided since it does not cover its cost given the required rate of return.