Net present value is calculated using the:
A)internal rate of return
B)required rate of return
C)rate of return required by the investment bankers
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

Net present value (NPV) is calculated by discounting future cash flows by the required rate of return, which represents the minimum rate of return that an investor or company requires to undertake the investment. Therefore, choice B, required rate of return, is the correct answer. The internal rate of return (choice A) is another capital budgeting technique, but it calculates the rate of return necessary for an investment to break even. It is not used directly in calculating NPV. Choice C, rate of return required by investment bankers, is not a relevant factor in NPV calculation.

Net Present Value Is Calculated Using The