Net present value and internal rate of return capital budgeting decisions can differ because
A)the initial costs of the capital outlays differ.
B)the cash flow streams differ.
C)the discount rates differ for different time periods.
D)All of the above

Question

Quizplus · Accepted Answer

All of the above options can affect the net present value and internal rate of return capital budgeting decisions.

A) The initial costs of the capital outlays differ: The initial costs of an investment will affect the net present value and internal rate of return calculations as they impact the cash outflow at the beginning of the project.

B) The cash flow streams differ: Differences in the timing and amount of cash inflows and outflows will affect both the net present value and internal rate of return calculations of a project.

C) The discount rates differ for different time periods: Differences in the discount rate used to calculate net present value and internal rate of return can affect the outcome of the decision-making process.

Therefore, all of these factors should be considered when evaluating capital budgeting decisions.

Net Present Value and Internal Rate of Return Capital Budgeting