Which of the following investment rules has value adding-up property?
A) The payback period method
B) Net present value method
C) The book rate of return method
D) The internal rate of return method

Question

Quizplus · Accepted Answer

The net present value method has value adding-up property, which means that the total net present value of a series of investments is equal to the sum of the net present values of each individual investment. This property enables decision-makers to make choices that result in maximizing the total net present value of a project, which is the goal of most investment decisions. The payback period method, book rate of return method, and internal rate of return method do not have value adding-up property.

Which of the Following Investment Rules Has Value Adding-Up Property