A capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows.
A) discounted payback
B) net present value
C) internal rate of return
D) profitability index

Question

Quizplus · Accepted Answer

The capital budgeting technique that generates a decision rule and associated metric for choosing projects based on their total discounted value of cash flows is the net present value (NPV). It calculates the present value of expected cash inflows minus the present value of expected cash outflows, considering the time value of money. Projects with positive NPV should be accepted because they generate value for the company. Discounted payback, internal rate of return, and profitability index are also capital budgeting techniques, but they do not consider the total discounted value of cash flows as the main decision rule. Therefore, B is the best choice in this case.

A Capital Budgeting Technique That Generates a Decision Rule and Associated