Question

Project A is opening a bakery at 10 Center Street. Project B is opening a specialty coffee shop at the same address. Both projects have unconventional cash flows, that is, both projects have positive and negative cash flows that occur following the initial investment. When trying to decide which project to accept, given sufficient funding to accept either, you should rely most heavily on the _____ method of analysis.

Answer 1

Options:

payback

net present value

internal rate of return

profitability index

discounted payback

Answer:Net present value

Explanation:Net present value is an analytical term used in Financial accounting to describe the difference between the present value of cash inflows and the present value of cash outflows over a given period of time. Net present value helps decision makers to determine the profitability of an investment.

THE DECISION MAKERS OF PROJECT A AND PROJECT B WILL HAVE TO DETERMINE THE NET PRESENT VALUE OF EACH PROJECT FOR THEM TO UNDERSTAND THE PROFITABILITY OF EACH RATIO,THROUGH THIS DETAILS THEY WILL MAKE THEIR CHOICE.