The __________ decision rule is considered the "best" in principle.
A) Internal rate of return.
B) Payback period.
C) Average accounting return.
D) Net present value.
E) Proﬁtability index.

Question

Quizplus · Accepted Answer

The net present value (NPV) decision rule is considered the best in principle as it takes into account the time value of money and considers all of the cash flows associated with a project. It measures the difference between the present value of the project's cash inflows and the present value of its cash outflows. If the NPV is positive, the project is acceptable, while a negative NPV indicates that the project should be rejected.

The __________ Decision Rule Is Considered the "Best" in Principle