When all future cash inflows and outflows are discounted to the present using the required rate of return, the method used is
A)capital budgeting.
B)discounted cash flow.
C)net present value.
D)required rate of return.
E)payback method.

Question

Quizplus · Accepted Answer

When calculating the present value of future cash inflows and outflows using the required rate of return, the method used is known as net present value (NPV) analysis. NPV is a commonly used capital budgeting technique that measures the potential profitability of an investment by comparing the present value of expected cash inflows to the present value of expected cash outflows. The required rate of return is often used as the discount rate in NPV analysis to account for the time value of money and the risks associated with the investment.

When All Future Cash Inflows and Outflows Are Discounted to the Present