The difference between the present value of an investment and its cost is the:
A) net present value.
B) internal rate of return.
C) payback period.
D) profitability index.
E) discounted payback period.

Question

Quizplus · Accepted Answer

The difference between the present value of an investment and its cost is referred to as the net present value (NPV). It is a financial measure that indicates whether the investment is profitable or not. NPV calculates the current value of future cash flows discounted to the present at a required rate of return. If the NPV is positive, it means the investment is expected to generate more cash than it costs, and if the NPV is negative, it means the investment is expected to generate less cash than it costs. Thus, option A is the correct answer.

The Difference Between the Present Value of an Investment and Its