The net present value is an interest rate chosen to reflect not only the time value of money, but the desired returns the company expects for the level of risk being taken.

Question

Quizplus · Accepted Answer

The net present value (NPV) is a calculation that discounts future cash flows to their present value using a specific discount rate, not an interest rate chosen to reflect desired returns or risk levels. The discount rate may reflect the company's cost of capital and risk, but NPV itself is a value, not a rate.

The Net Present Value Is an Interest Rate Chosen to Reflect