Question

NPV method relates with

• A. Time value of money
• B. Inflated value of money
• C. All present values of money
• D. None of these

Hint:

NPV = Present Value of Cash Inflows – Present Value of Cash Outflows.

Answer 1

The Correct Option is C

Step 1: Understanding NPV.
NPV (Net Present Value) is a financial method used to evaluate investments by calculating the difference between present value of cash inflows and outflows.
Step 2: Importance of present value.
NPV considers the time value of money, i.e., a rupee today is more valuable than a rupee in the future.
Hence, all future cash flows are discounted to their present value.
Step 3: Option analysis.
- (A) Time value of money: Related, but incomplete.
- (B) Inflated value of money: Wrong, inflation is not directly considered in NPV.
- (C) All present values of money: Correct, as NPV sums all present values to evaluate investments.
- (D) None of these: Wrong, since (C) is right.
Step 4: Conclusion.
NPV method relates with all present values of money.