The ________ approach compares two alternative projects by computing the total cash flows of each alternative and then converting these total cash flows to their present values.
A)differential
B)payback
C)total project
D)sensitivity

Question

Quizplus · Accepted Answer

The total project approach is also known as the discounted cash flow method, and it involves calculating the present value of the future cash flows generated by each alternative project. This allows for an accurate comparison of the profitability of each project, and makes it possible to determine which project will generate the greatest return on investment over its useful life. The differential approach compares the incremental cash flows between two projects, while the payback method only considers the time it takes to recover the initial investment. The sensitivity analysis focuses on testing the impact of changes in certain input parameters on the profitability of the project.

The ________ Approach Compares Two Alternative Projects by Computing the Total