Asked by Eribel Almonte on Jun 01, 2024
Verified
The present value index is computed using which of the following formulas?
A) Amount to Be Invested/Average Rate of Return
B) Total Present Value of Net Cash Flow/Amount to Be Invested
C) Total Present Value of Net Cash Flow/Average Rate of Return
D) Amount to Be Invested/Total Present Value of Net Cash Flow
Present Value Index
An investment appraisal tool that compares the present value of net cash inflows generated by a project to the present value of cash outflows, indicating the profitability.
Net Cash Flow
The difference between a company’s cash inflows and outflows in a given period, indicating the company's ability to generate cash.
Amount to Be Invested
The total sum of money dedicated to a particular investment or project.
- Gain an insight into how the present value factor influences investment evaluation.
Verified Answer
Learning Objectives
- Gain an insight into how the present value factor influences investment evaluation.
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