In capital budgeting computations, discounted cash flow methods:
A)automatically provide for recovery of initial investment.
B)can't be used unless cash flows are uniform from year to year.
C)assume that all cash flows occur at the beginning of a period.
D)ignore all cash flows after the payback period.

Question

Quizplus · Accepted Answer

Discounted cash flow methods, such as net present value (NPV) and internal rate of return (IRR), take into account the time value of money and provide for recovery of the initial investment by discounting all future cash flows back to their present value. It is not necessary for cash flows to be uniform from year to year, and while some methods assume cash flows occur at the beginning of a period, others assume they occur at the end. Additionally, discounted cash flow methods consider all cash flows, both before and after the payback period.

In Capital Budgeting Computations, Discounted Cash Flow Methods