Economics · Capital Budgeting
Which of the following best reflects the theoretical justification of the Net Present Value (NPV) method in capital budgeting?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It eliminates the need to estimate the cost of capital
- 2It evaluates project profitability solely through accounting income adjustments
- 3It measures project desirability by comparing discounted inflows with the opportunity cost of capital✓
- 4It assumes reinvestment of intermediate cash flows at the internal rate of return
Correct answer
It measures project desirability by comparing discounted inflows with the opportunity cost of capital
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