Question

Of the following, which is considered in the net present value method? A : Present value of unequal amounts of annual net income generated by the project. B : Present value of depreciation expense. C : Present value of liquidation proceeds. D : Present value of equal amounts of annual net income generated by the project.

Answer 1

The correct answer is letter "B": Present value of depreciation expense.

Step-by-step explanation:

Depreciation indicates how much an asset's value has been used up. It also tries to match the expense of an asset to the income the asset helps the company earn. Depreciation is not a cash expense but it affects the profits of a firm, thus, it must be considered in the cash flow at the moment of calculating the net present value.

Answer 2

C : Present value of liquidation proceeds.

Step-by-step explanation:

tems involving actual cash flows are only considered in the net present value method.