Which of the following investment criteria takes the time value of money into consideration?
A)payback period only.
B)profitability index only.
C)internal rate of return for borrowing projects only.
D)payback period, profitability index and IRR.

Question

Quizplus · Accepted Answer

Payback period, profitability index, and IRR all take the time value of money into consideration. Payback period measures the time it takes for the initial investment to be recovered, while profitability index calculates the present value of future cash flows against the initial investment. IRR represents the discount rate at which the net present value of the project is equal to zero, taking into account the time value of money. Therefore, all three criteria are useful in determining the profitability and feasibility of a project considering the time value of money.

Which of the Following Investment Criteria Takes the Time Value