Which of the following best explains why the net present value method of capital budgeting is preferred over the internal rate-of-return method?
A) the net present value method is expressed as a percentage of initial investment
B) the net present values of individual projects can be added to determine the effects of accepting a combination of projects
C) the percentage return computed under the net present value method is very easy to compare
D) the calculation under the net present value method is easy as it does not use time value of money

Question

Quizplus · Accepted Answer

The net present value method allows for the calculation of the net present value of individual projects, which can be added to determine the effects of accepting a combination of projects. The internal rate-of-return method does not provide this benefit.

Which of the Following Best Explains Why the Net Present