Which scenario leads to rejecting a project when using the NPV method?

When using the Net Present Value (NPV) method to evaluate investment projects, a negative NPV indicates that the project's expected cash flows, when discounted back to their present value, do not exceed the initial investment. This situation implies that the project would result in a net loss rather than a profit. Therefore, it is financially unwise to pursue a project with a negative NPV, as it fails to provide a return that meets or exceeds the cost of capital.

In contrast, an NPV that is positive indicates that the project is expected to generate value exceeding its costs, making it a viable option for investment. An NPV of zero suggests the project will break even, returning exactly the cost of capital but not providing any additional profit; while this might not lead to rejection, it typically would not be pursued for investment since it lacks profitability. The scenario where the NPV equals the initial investment also indicates that the project would merely recover its initial cost without providing a return, which similarly might not justify investment. Thus, only a negative NPV clearly signals rejection of the project from a financial standpoint.