A division manager is considering a project that requires a significant initial investment.The company's top management will NOT approve any project that does not return at least 12%.Which capital investment model will the manager most likely use?

Question

Quizplus · Accepted Answer

The net present value (NPV) model takes into account the time value of money and uses a discount rate to calculate the present value of a project's expected cash flows. It is the most appropriate model for a company that has a minimum required rate of return, as it directly compares the present value of project cash flows to the initial investment. If the NPV is positive, it means the project will exceed the minimum required return and is acceptable for investment.

A Division Manager Is Considering a Project That Requires a Significant