In net present value analysis for a proposed capital investment, the expected future net cash flows are reduced to their present values.

Question

Quizplus · Accepted Answer

In net present value analysis, the expected future net cash flows are discounted to their present values using a discount rate, which factors in the time value of money. This means that future cash flows are reduced to their equivalent values at the present time, allowing for a more accurate evaluation of the investment's potential profitability.

In Net Present Value Analysis for a Proposed Capital Investment