Which of the following evaluation methods ignores the time value of money?
A)The accounting rate-of-return and discounted cash flow methods
B)The net present value and discounted cash flow methods
C)The payback period and net present value methods
D)The accounting rate-of-return and payback period methods

Question

Quizplus · Accepted Answer

The accounting rate-of-return and payback period methods do not take into account the time value of money. The accounting rate-of-return method calculates the average net income return as a percentage of the average investment, while the payback period method calculates the time it takes to recover the initial investment. Both methods ignore the fact that money has a value that changes over time due to inflation and interest rates.

Which of the Following Evaluation Methods Ignores the Time Value