Which of these capital budgeting methods can directly indicate the change in value of the firm that results from taking on a capital project?
| A. |
IRR |
|
| B. |
Payback period |
|
| C. |
NPV |
|
| D. |
MIRR |
C. NPV
Net Present value is the difference of Present value of Cash inflows and Present value of cash outflow from a project. Thus, If NPV of project is positive then it increase the value of firm and NPV is negative then it decreases the value of firm.
NPV is a absolute measure thus it directly indicate the change in value of the firm.
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
Which of these capital budgeting methods can directly indicate the change in value of the firm...