The "gold standard" of investment criteria refers to the:
A) net present value rule.
B) internal rate of return rule.
C) payback rule.
D) profitability index rule.

Question

Quizplus · Accepted Answer

The "gold standard" of investment criteria is the net present value (NPV) rule. This is because NPV takes into account the time value of money and considers all cash flows associated with a project, including the initial investment and all future inflows and outflows, discounted to their present value. The other investment criteria, such as the internal rate of return (IRR), payback rule, and profitability index (PI) have limitations and can lead to incorrect investment decisions in some cases. Therefore, NPV is considered the most reliable and comprehensive investment criterion.

The "Gold Standard" of Investment Criteria Refers to The