BUSINESS ADMINISTRATION
ENTREPRENEURIAL DEVELOPMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Net present value technique.
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Average rate of return.
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Benefit-Cost ratio.
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Internal rate of return
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Detailed explanation-1: -Net present value (NPV) is defined as the difference between the present value of cash inflows and outflows.
Detailed explanation-2: -Excess present value index can be defined as the total present value of future net cash inflows divided by the total cash outflow.
Detailed explanation-3: -Answer and Explanation: Internal rate of return (IRR) equates the present value of cash inflows and outflows.
Detailed explanation-4: -NPV > 0-The present value of cash inflows is more than the present value of cash outflows. The money earned on the investment is more than the money invested. Hence, it is a good investment.
Detailed explanation-5: -The profitability index is a ratio of the present value of Cash flows by the initial cash outflows of the project. In this case, the present value of Cash flows exceeds the initial project cost hence the resulting index will be greater than one and should be accepted.