Economics · Financial Management
Which one of the following best explains the Net Present Value (NPV) method of capital budgeting?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It ignores the time value of money while evaluating investment proposals
- 2It measures the average rate of return on investment based on accounting profit
- 3It determines the difference between the present value of cash inflows and the present value of cash outflows✓
- 4It calculates the time required to recover the initial investment
Correct answer
It determines the difference between the present value of cash inflows and the present value of cash outflows
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