Because "Present Value" Refers to the Value of Cash Flows

question 8

True/False

Because "present value" refers to the value of cash flows that occur at different points in time, a series of present values of cash flows should not be summed to determine the value of a capital budgeting project.

---

Definitions:

Benefit-Cost Perspective

A method of evaluating projects or decisions by comparing the benefits they will generate to the costs required to implement them.

NPV

Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

Present Value

The today's worth of a future sum or cash flows series, based on a predetermined rate of return.

Cash Inflows

Refers to the money coming into a company, typically from operations, investments, and financing activities.