Net present value is considered a sophisticated capital budgeting technique since it gives explicit consideration to the time value of money.

Question

Quizplus · Accepted Answer

Net present value accounts for the fact that a dollar received in the future is worth less than a dollar received today due to inflation and the opportunity cost of not having the money available to invest elsewhere immediately. Therefore, it is a more accurate measure of the profitability of an investment than other methods that do not consider the time value of money.

Net Present Value Is Considered a Sophisticated Capital Budgeting Technique