Question

Which of the following is a reason that makes NPV a better approach to capital budgeting on a purely theoretical basis? 

 A. Financial decision makers are inclined to higher rates of return. 

 B. It measures the benefits relative to the amount invested. 

 C. It measures the actual value created by an investment. 

 D. Interest rates are expressed as annual rates of return.

Answer 1

Because it calculates the present value of future cash flows