To calculate a project's net present value (NPV),the project's required rate of return is used to:

Question

Quizplus · Accepted Answer

To calculate the NPV, we need to convert future cash flows into their equivalent values today, also called present values. This is done by discounting these future cash flows using the project's required rate of return. Compounding cash flows to their future values (choice A) is the opposite of what we need to do to calculate NPV. Computing the weighted average cost of capital (choice C) is necessary to calculate the required rate of return, but it is not used directly to calculate the NPV. Converting non-operating cash flows into operating cash flows (choice D) is not related to calculating the NPV.

To Calculate a Project's Net Present Value (NPV),the Project's Required