The net present value method of evaluating proposed investments
A)measures a project's internal rate of return.
B)ignores cash flows beyond the payback period.
C)applies only to mutually exclusive investment proposals.
D)discounts cash flows at a minimum desired rate of return.

Question

Quizplus · Accepted Answer

The net present value method discounts all cash flows of a proposed investment at a minimum desired rate of return, and considers cash flows beyond the payback period. It can be used to evaluate both mutually exclusive and independent investment proposals. It is not the same as measuring internal rate of return, which is a separate method of investment evaluation.

The Net Present Value Method of Evaluating Proposed Investments