What is the first step in applying the net-present-value method to investment projects?
A) Identify the amount and timing of relevant future cash inflows.
B) Identify the amount and timing of relevant future cash inflows and outflows.
C) Find the present value of each expected cash flow.
D) Sum the individual present values of the cash flows.

Question

Quizplus · Accepted Answer

The first step in applying the net-present-value method to investment projects is to identify the amount and timing of relevant future cash inflows and outflows. This will allow for the calculation of the net present value of the investment, which takes into account the time value of money and the opportunity cost of capital. Once the relevant cash flows are identified, their present values can be calculated, and then summed to determine the net present value of the investment.

What Is the First Step in Applying the Net-Present-Value Method