Comparing Net Present Value and Internal Rate of Return ________

question 156

Multiple Choice

Comparing net present value and internal rate of return ________.

• A) always results in the same ranking of projects
• B) always results in the same accept-reject decision
• C) may give different accept-reject decisions
• D) is only necessary on independent projects

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Definitions:

Net Present Value

Calculating the variance between the present-day value of cash flows in and out over an established timeframe.

Average Accounting Return

The ratio of average net income to average invested capital, often used in financial analysis to assess investment attractiveness.

Profitability Index

A financial metric that calculates the ratio of the present value of future cash flows from an investment to the initial investment cost, used to evaluate the desirability of projects.

Present Value

Present value refers to the current value of a future amount of money or series of cash flows, calculated using a specific rate of return.