Answered: Which one of the following is most…

Which one of the following is most closely related to the net present value profile? A: Payback B: Discounted payback C: Profitability index D: Average accounting return E: Internal rate of return

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17Q: What is the difference between the discount rate used for net present value and the internal rate of...

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Question

Which one of the following is most closely related to the net present value profile?

A: Payback

B: Discounted payback

C: Profitability index

D: Average accounting return

E: Internal rate of return

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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