The term net present value means the difference between:

Question

Quizplus · Accepted Answer

Net Present Value (NPV) is a method used to evaluate the potential profitability of an investment by calculating the present value of expected cash inflows and subtracting the present value of the initial investment. Therefore, the correct option is D, which states that NPV is the difference between the present value of net cash inflows and the investment's cost. Option A is incorrect because it mentions total net income, not net cash inflows. Option B refers to residual value, which may or may not be involved in the calculation of NPV. Option C may seem logical, but it is still incorrect because NPV considers only the present value of cash flows and not their future value.

The Term Net Present Value Means the Difference Between