The net present value method of evaluating capital investments suggests that an investment with net cash inflows which exceed the initial cost of the investment is desirable.

Question

Quizplus · Accepted Answer

The net present value (NPV) method determines the present value of all future cash inflows that will be generated by an investment, subtracted by the initial cost of the investment. If the result is positive, then the investment is profitable and desirable as it generates more cash than it costs. Therefore, Option A is correct.

The Net Present Value Method of Evaluating Capital Investments Suggests