Which of the following is a true statement regarding the net present value method in capital budgeting?
A) it provides the same basic information as the accounting rate of return.
B) it calculates the present value of future cash flows.
C) it calculates the proposal's rate of return.
D)it doesn't consider the time value of money.

Question

Quizplus · Accepted Answer

The net present value (NPV) method calculates the present value of future cash flows by discounting them with a specified rate of return. It considers the time value of money, unlike accounting rate of return which doesn't take into account the timing of cash flows. NPV also indicates whether a project is profitable or not by comparing the present value of cash inflows to the initial investment.

Which of the Following Is a True Statement Regarding the Net