NPV is the most theoretically correct capital budgeting decision tool examined in the text.

Question

Quizplus · Accepted Answer

The Net Present Value (NPV) method takes into account the time value of money and considers all cash flows associated with a project or investment, making it the most conceptually sound and theoretically correct capital budgeting decision tool. It calculates the present value of future cash inflows minus the present value of future cash outflows, giving a clear indication of a project's profitability and potential for generating positive returns.

NPV Is the Most Theoretically Correct Capital Budgeting Decision Tool