Question

If the regulatory process is working effectively, the aggregate of all projects undertaken by a nondiversified electric utility firm should have a net present value that equals zero. Why is this true

Answer 1

If the regulatory process is working effectively, the aggregate of all projects undertaken by a nondiversified electric utility firm should have a net present value that equals zero. This is true because some project's NPV may be negative and some other project's NPV may be positive, so the aggregate of all projects will have zero NPV.