Asked by Alexandra Ibanez on Jul 17, 2024
Verified
Which of the following are present value methods of analyzing capital investment proposals?
A) internal rate of return and average rate of return
B) average rate of return and net present value
C) net present value and internal rate of return
D) net present value and cash payback
Present Value
The present value of a future amount of money or a series of future cash flows, discounted at a specific rate of return.
Internal Rate of Return
The discount rate that makes the net present value of all cash flows from a particular project equal to zero.
Net Present Value
A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.
- Grasp the concept of present value and apply it to evaluate capital investment proposals.
- Identify the methods used in capital investment analysis that account for or ignore present value.
Verified Answer
PA
Pooja AdhikariJul 21, 2024
Final Answer :
C
Explanation :
Net present value (NPV) and internal rate of return (IRR) are both present value methods used in capital budgeting to assess the profitability of an investment or project. NPV calculates the present value of cash flows, while IRR finds the discount rate that makes the NPV of cash flows equal to zero.
Learning Objectives
- Grasp the concept of present value and apply it to evaluate capital investment proposals.
- Identify the methods used in capital investment analysis that account for or ignore present value.