The method of evaluating long-term investment decisions that involves computing the present value of the future inflows, and subtracting the cost of the investment, is called the
A) Payback method
B) Internal rate of return method
C) Accounting rate of return method
D) Net present value method

Question

Quizplus · Accepted Answer

The net present value (NPV) method is the method of evaluating long-term investment decisions that involves computing the present value of the future inflows, and subtracting the cost of the investment. This method takes into account the time value of money and provides a more accurate measure of the profitability of an investment. The higher the NPV, the more attractive the investment is.

The Method of Evaluating Long-Term Investment Decisions That Involves Computing