Which of the following is a method used for evaluating the profitability of an investment by finding the interest rate that equates the present value of cash inflows with the present value of outflows?
Answer: NPV
Explanation
NPV is the difference between the present value of cash inflows and cash outflows over a period of time.
NPV stands for Net present value
It is used in capital budgeting and investment planning
formula:
NPV = Cash Inflow Year 1 / (1 + Discount Rate)^1 + Cash Inflow Year 2 / (1 + Discount Rate)^2 + ... + Cash Inflow Year n / (1 + Discount Rate)^n - Initial Investment
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