What is the first step in applying the net-present-value method to investment projects?
A)Identify the amount and timing of relevant future cash inflows.
B)Identify the amount and timing of relevant future cash inflows and outflows.
C)Find the present value of each expected cash flow.
D)Find the discount rate to use for the project.

Question

Quizplus · Accepted Answer

The first step in applying the net-present-value method to investment projects is to identify the amount and timing of relevant future cash inflows and outflows. This information is necessary to determine the net cash flows for each period which can then be discounted to present value. Once the net cash flows have been calculated, the present value of each expected cash flow can be found and the discount rate can be determined.

What Is the First Step in Applying the Net-Present-Value Method