The analysis technique that uses a discount rate determined from the company's cost of capital to establish the present value of a project is commonly called:
A) return on investment (ROI).
B) break-even analysis (BEA).
C) net present value (NP
D) future value (FV).
E) currency rate analysis (CRA).

Question

Quizplus · Accepted Answer

The analysis technique described in the question is net present value (NPV), which calculates the present value of future cash flows using a discount rate based on the company's cost of capital. Choice A (return on investment) refers to a profitability ratio, not a specific analysis technique. Choice B (break-even analysis) determines the level of sales needed to cover costs but does not use a discount rate. Choice D (future value) calculates the value of an investment at a future date, not the present value. Choice E (currency rate analysis) is not relevant to this question.

The Analysis Technique That Uses a Discount Rate Determined from the Company's