Is net present value (NPV) the best investment technique? Why? Do you agree with this assessment?

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Expert Solution

The net cash flows are determined and they are discounted back to present values. The project with the highest net present value is selected.

The biggest advantage of net present value is that it takes into account the present value that is money received today is worth more than money received tomorrow. In short it considers the time value of money.

Net present value gives company management a clearer picture of whether an investment will add value to the company. If the net present value has a positive value, it will add value and benefit the company’s shareholders.

It is used in making capital budgeting decisions. Net present value helps to find out if the projected future cash flows cover the future cost of starting and running a business. It helps to understand how much an investment or project is worth. It is because of all this, that net present value is the best investment technique. It gives a clearer picture in making capital budgeting decisions.

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jeff jeffy answered 1 week ago

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