The ________ approach computes the differences in cash flows between two alternatives and then finds the present value of these differences.
A) differential
B) payback
C) total project
D) sensitivity

Question

Quizplus · Accepted Answer

The differential approach involves comparing the cash flows between two alternatives and finding the present value of the differences. This approach allows for a more accurate comparison between alternatives by accounting for the time value of money. The payback approach only considers the time it takes to recoup an investment and does not take into account the value of cash flows beyond this point. The total project approach looks at the overall cash flows for a single project, rather than comparing alternatives. The sensitivity approach examines how changes in certain variables impact the cash flows of a project.

The ________ Approach Computes the Differences in Cash Flows Between