The Net Present Value (NPV) Method Is Considered to Be

question 59

Multiple Choice

The net present value (NPV) method is considered to be a better method of evaluation than the internal rate of return (IRR) method because the NPV method

• A) uses time value of money while IRR does not.
• B) is a more liberal method of analysis.
• C) assumes that cash flows can be reinvested at the firm's more conservative cost of capital.
• D) None of these options are true.

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Definitions:

Commercial Paper

A short-term, unsecured debt instrument issued by companies to finance their immediate operational needs.

Short-term Borrowing

Loans or debt obligations that are expected to be paid back within a short period, typically less than one year, often used for operational expenses.

Carrying Costs

Expenses associated with holding or storing inventory over a period of time, including insurance, storage, and depreciation.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed in the business within one year or within the normal operating cycle.