In net present value analysis,a reduction in a future cash outflow is treated as ________.
A) an irrelevant cash flow
B) a cash inflow
C) a disposal value of a long-term asset
D) an expense

Question

Quizplus · Accepted Answer

A reduction in a future cash outflow is considered as a cash inflow because it results in an increase in the overall net cash inflow. This is because a decrease in future expenses, such as operating costs or taxes, will increase the net cash flow and, therefore, the net present value of an investment or project.

In Net Present Value Analysis,a Reduction in a Future Cash