Out of all methods of evaluating capital investments, the discounted cash flow methods are superior because they consider both the time value of money and the profitability of the investment.

Question

Quizplus · Accepted Answer

The discounted cash flow methods, such as net present value and internal rate of return, take into account the time value of money by discounting future cash flows and also consider the profitability of an investment by comparing the cash inflows and outflows. This makes them a superior method of evaluating capital investments compared to other methods that do not incorporate both these factors.

Out of All Methods of Evaluating Capital Investments, the Discounted