The net present value method is extremely useful when an organization does not require the same rate of return each year of the project.

Question

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Net present value (NPV) method takes into account the time value of money by discounting future cash flows to their present value. It allows an organization to compare the present value of expected future cash inflows and outflows of a project considering the cost of capital. This method is beneficial when the project requires a different rate of return each year. Therefore, the statement is true.

The Net Present Value Method Is Extremely Useful When an Organization