Which of the following investment criteria takes the time value of money into consideration?
A) Net present value
B) Profitability index
C) Internal rate of return for borrowing projects
D)All of these

Question

Quizplus · Accepted Answer

All three investment criteria take into consideration the time value of money. Net present value (NPV) discounts future cash flows to their present value using a discount rate. Profitability index (PI) is calculated as the ratio of the present value of future cash flows to the initial investment. Internal rate of return (IRR) calculates the discount rate that makes the present value of future cash flows equal to the initial investment. Hence, all of these take into consideration the time value of money.

Which of the Following Investment Criteria Takes the Time Value