Net present value is the difference between the
A) future cash inflows and the capital investment.
B) future cash inflows and the present value of the capital investment.
C) present value of future cash inflows and the capital investment.
D) present value of future net income and the capital investment.

Question

Quizplus · Accepted Answer

Net present value (NPV) is the present value of future cash inflows minus the capital investment. Option C accurately describes this calculation. Option A is incorrect because it does not account for the time value of money. Option B is incorrect because it uses the present value of the capital investment instead of its initial value. Option D is incorrect because it does not subtract the initial investment from the present value of future income.

Net Present Value Is the Difference Between the