Which of the following is a present value method of analyzing capital investment proposals?

Question

Quizplus · Accepted Answer

Net present value (NPV) is a present value method that involves calculating the present value of the expected cash inflows and subtracting the initial cost of the investment. This provides a net present value, which represents the current value of the project's future cash flows. The NPV method is considered the most reliable capital budgeting technique since it considers the time value of money and provides a clear indication of the profitability of the investment. The other options (average rate of return, cash payback method, and accounting rate of return) do not take into account the time value of money and are less accurate in evaluating capital investment proposals.

Which of the Following Is a Present Value Method of Analyzing