Why is it usually necessary to use the time value of money when performing a cost-benefit analysis?
A) For an investment project to be considered, costs must have a higher dollar value than benefits.
B) In most investment projects, costs are incurred up front, but benefits are received in the future.
C) For practical purposes, a dollar today may be considered to be equal to a dollar at some future time.
D) Although costs and benefits generally occur concurrently, the benefits will accrue value over time, due to interest.

Question

Quizplus · Accepted Answer

The time value of money principle recognizes that a dollar today is worth more than a dollar in the future due to its potential earning capacity. This is crucial in cost-benefit analysis, especially for projects where costs are incurred immediately, but benefits are realized over time, as stated in option B.

Why Is It Usually Necessary to Use the Time Value