Investment methods,such as net present value and internal rate of return,________.

Question

Quizplus · Accepted Answer

Investment methods such as net present value (NPV) and internal rate of return (IRR) consider discounted cash flows. This means that they take into account the time value of money and adjust for inflation and the cost of borrowing. Simple interest calculations and just focusing on the payback period do not fully account for these factors and can lead to inaccurate investment decisions. Investing based on net income amounts rather than cash flows can also be misleading as it does not consider the timing or amount of cash flows, which can greatly impact the overall profitability of an investment.

Investment Methods,such as Net Present Value and Internal Rate of Return,________