The correct answer is A. negative.
Net present value (NPV) is a measure of the profitability of a project. It is calculated by taking the present value of all future cash flows and subtracting the initial investment. If the NPV is positive, the project is expected to be profitable. If the NPV is negative, the project is expected to be unprofitable.
In the case of a project whose cash flows are less than the capital invested for the required rate of return, the NPV will be negative. This is because the present value of the future cash flows will be less than the initial investment. This means that the project is not expected to be profitable.
Here is a brief explanation of each option:
- Option A: Negative. This is the correct answer. As explained above, if the NPV is negative, the project is expected to be unprofitable.
- Option B: Zero. This is not the correct answer. If the NPV is zero, the project is expected to break even. This means that the present value of the future cash flows will be equal to the initial investment.
- Option C: Positive. This is not the correct answer. As explained above, if the NPV is positive, the project is expected to be profitable.
- Option D: Independent. This is not the correct answer. The NPV is not independent of the cash flows and the required rate of return. The NPV is calculated by taking the present value of the future cash flows and subtracting the initial investment.