How are present values of cash flows obtained in a Net Present Value calculation?
A) By discounting at the opportunity cost of capital
B) By adding a term to allow for future risk
C) By allowing for the internal rate of return
D) By discounting at the impatience to consume rate of return

Question

Quizplus · Accepted Answer

The present values of cash flows are obtained in a net present value calculation by discounting at the opportunity cost of capital. This allows for the time value of money and represents the required rate of return for investing in a particular project or investment.

How Are Present Values of Cash Flows Obtained in a Net