Net present value is calculated using the ________.
A) internal rate of return
B) discount rate
C) risk-free rate
D) predetermined overhead cost rate

Question

Quizplus · Accepted Answer

Net present value (NPV) is calculated by discounting cash flows by a discount rate to account for the time value of money. Therefore, the correct answer is the discount rate (B). The internal rate of return (A) is related to NPV but is used to find the discount rate at which NPV is equal to zero. The risk-free rate (C) is a benchmark interest rate used in finance, but it is not directly used in the calculation of NPV. Predetermined overhead cost rate (D) refers to a measure used in managerial accounting and is not directly relevant to NPV calculation.

Net Present Value Is Calculated Using the ________