Which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyse a variety of investment opportunities?
A)payback
B)profitability index
C)accounting rate of return
D)internal rate of return
E)net present value

Question

Quizplus · Accepted Answer

Net present value (NPV) is generally considered to be the best form of analysis for a variety of investment opportunities because it takes into account the time value of money and provides a measure of the project's contribution to shareholder wealth. It compares the present value of cash inflows to the present value of cash outflows, and if the NPV is positive, the investment is expected to increase shareholder wealth. Other methods such as payback, profitability index, accounting rate of return, and internal rate of return may provide useful information, but do not consider the time value of money in the same way that NPV does.

Which One of the Following Is Generally Considered to Be