The net present value of a project depends upon the
A)company's choice of accounting method.
B)manager's tastes and preferences.
C)project's cash flows and opportunity cost of capital.
D)company's profitability index.

Question

Quizplus · Accepted Answer

The net present value (NPV) of a project is calculated by determining the present value of expected cash inflows and subtracting the present value of expected cash outflows. The opportunity cost of capital is the minimum acceptable rate of return that an investor expects to earn for taking on a project. Therefore, the NPV of a project depends on the project's cash flows and the opportunity cost of capital. The company's choice of accounting method or the manager's tastes and preferences do not directly influence the NPV of a project. Profitability index is a related metric used to compare the profitability of different projects, but it is not directly used to calculate the NPV of a single project.

The Net Present Value of a Project Depends Upon the