The Process of Converting Future Cash Flows to What Its

question 28

Multiple Choice

The process of converting future cash flows to what its present value is:

• A) time value of money.
• B) discounting.
• C) compounding.
• D) none of the above.

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Definitions:

Net Present Value

A method used to evaluate the profitability of an investment or project, calculated by discounting future cash flows to their present value.

Rate of Return

The increase or decrease in value of an investment during a set timeframe, shown as a percent of the investment's original price.

Accelerated Depreciation

A method of depreciation in which an asset loses value faster in the initial years of its useful life, with decreased amounts in later years.

Net Present Value

A method of evaluating investments by calculating the present value of future cash flows minus the initial investment cost, used to assess the profitability of an investment.