The New Blues Co. is considering two projects. Project A consists of building a wholesale book outlet on lot #169 of the Minglewood Retail Center. Project B consists of building a sit-down restaurant on lot #169 of the Minglewood Retail Center. When trying to decide whether or build the book outlet or the restaurant, management should rely most heavily on the analysis results from the _____ method of analysis.
A) Profitability index.
B) Internal rate of return.
C) Payback.
D) Net present value.
E) Accounting rate of return.

Question

Quizplus · Accepted Answer

The Net Present Value (NPV) method is the most reliable for making investment decisions because it considers the time value of money, providing a clear estimate of the project's profitability by comparing the present value of cash inflows to the present value of cash outflows.