Which figure of merit provides an interest rate at which the present value of the future cash flows equals the amount invested? a) NPV b) IRR c) Cap Rate d) DCF Please ensure accuracy and explain your choice

Which figure of merit provides an interest rate at which the present value of the future cash flows equals the amount invested? a) NPV b) IRR c) Cap Rate d) DCF Please ensure accuracy and explain your choice

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

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Question

Which figure of merit provides an interest rate at which the present value of the future cash flows equals the amount invested?

a) NPV

b) IRR

c) Cap Rate

d) DCF

Please ensure accuracy and explain your choice

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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