Question

_________ quantifies, in dollar terms, how stockholder wealth will be affected by undertaking a project.

Multiple Choice
a)Discounted payback analysis.
b)The internal rate of return.
c)The profitability index.
d)Net present value.
e)The average accounting return.

Answer 1

Net present value (NPV) is the financial metric that measures, in dollar terms, the impact of a project on stockholder wealth by calculating the present discounted value of future cash flows.

Step-by-step explanation:

The financial metric that quantifies, in dollar terms, how stockholder wealth will be affected by undertaking a project is Net present value (NPV). NPV is the calculation of the present value of the cash inflows and outflows of a project. It compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account, and is a standard method for using the time value of money to appraise long-term projects. This approach allows businesses and governments to evaluate the potential profitability of an investment, such as physical capital investments, highway safety features, or environmental policies, by comparing the present costs to the present discounted value of future benefits.