According to the Net Present Value (NPV)method of evaluation of projects,if there are cash outflows for multiple periods
A) only the cash outflows for the first five years will have to be discounted back to the current period.
B) the NPV of the project will definitely be positive.
C) the discount rate will need to be altered.
D) those cash outflows will have to be discounted back to the current period.

Question

Quizplus · Accepted Answer

According to the NPV method, all future cash flows (both inflows and outflows) need to be discounted back to the present period in order to evaluate a project. Therefore, if there are cash outflows for multiple periods, each cash outflow will have to be discounted back to the present period separately. Hence, the correct answer is D. Choices A and B are incorrect as they are not consistent with the NPV method. Choice C may or may not be true depending on the specific circumstances of the project, but it is not a necessary condition for evaluating cash outflows for multiple periods using the NPV method.

According to the Net Present Value (NPV)method of Evaluation of Projects,if