The "decision model that computes the difference between the present value of the investment's net cash inflows, using a desired rate of return, and the cost of the initial investment" is best described by which of the following terms?

Question

Quizplus · Accepted Answer

The term that best describes the decision model mentioned in the question is "net present value" (NPV). NPV is used to analyze the profitability of an investment by calculating the difference between the present value of the investment's net cash inflows and the initial cost of the investment. The desired rate of return is used as the discount rate to calculate the present value of cash inflows. A positive NPV indicates that the investment is profitable and should be accepted, while a negative NPV indicates that the investment is not profitable and should be rejected.

The "Decision Model That Computes the Difference Between the Present