The difference between the present value of future after-tax cash inflows and the present value of future cash outflows of an investment project is the:
A) Internal rate of return (IRR) of the project.
B) Modified internal rate of return (MIRR) on the project.
C) Book (accounting) rate of return for the project.
D) Net present value (NPV) of the project.
E) Modified internal rate of return (MIRR) of the project.

Question

Quizplus · Accepted Answer

The difference between the present value of future after-tax cash inflows and the present value of future cash outflows of an investment project is the net present value (NPV) of the project. NPV is a measure of the profitability of an investment project and is calculated by subtracting the present value of cash outflows from the present value of cash inflows, both adjusted for time and the cost of capital. Therefore, choice D is the best answer.

The Difference Between the Present Value of Future After-Tax Cash