Which one of the following methods determines the amount of the change a proposed project will have on the value of a firm?
A)net present value
B)discounted payback
C)internal rate of return
D)profitability index
E)payback

Question

Quizplus · Accepted Answer

Net present value (NPV) measures the change in the value of a firm by subtracting the project's initial investment cost from the present value of its expected cash flows. NPV also accounts for the time value of money and provides a clear indication of whether a particular investment will add value to the firm or not. Therefore, it is the best method for determining the amount of change a proposed project will have on the value of a firm. While the other methods (discounted payback, internal rate of return, profitability index, and payback) are also useful for investment analysis, NPV remains the most widely used method for decision-making.

Which One of the Following Methods Determines the Amount of the Change