The time value of money is explicitly considered in which one of the following capital budgeting method(s)?
A) Payback method.
B) Net present value (NPV) method.
C) Operating cash-flow method.
D) Book (accounting) rate of return method.
E) Residual income method.

Question

Quizplus · Accepted Answer

The net present value (NPV) method explicitly considers the time value of money, by discounting future cash flows back to their present value using a discount rate. The payback method, operating cash-flow method, book rate of return method, and residual income method do not explicitly consider the time value of money.

The Time Value of Money Is Explicitly Considered in Which