Net present value is calculated using which of the following?
A) internal rate of return
B) required rate of return as a discount rate
C) risk-free rate
D) predetermined overhead cost rate

Question

Quizplus · Accepted Answer

Net present value (NPV) is calculated as the present value of expected cash inflows minus the present value of expected cash outflows, using a discount rate as the time value of money. The required rate of return is commonly used as a discount rate for NPV calculations. Internal rate of return (IRR) is another commonly used method for evaluating potential investments, but it is not used to calculate NPV. Risk-free rate and predetermined overhead cost rate are not relevant to NPV calculations.

Net Present Value Is Calculated Using Which of the Following