Net present value is a highly valued decision-making tool because:

A) It only includes information which is known with certainty.
B) It is computed using the internal rate of return.
C) It can be applied to either independent or mutually exclusive projects.
D) It reveals the rate of return which investors will earn on average over the lifetime of the project.
E) It is affected by the magnitude rather than the timing of a project's cash flows.

Net Present Value

The disparity between the current value of cash coming in and the current value of cash going out over a certain time frame, employed in capital budgeting to evaluate an investment or project's profitability.

Independent Projects

Investment projects that do not affect each other’s outcomes or acceptability. Evaluating one does not impact the consideration of another.

Mutually Exclusive

Situations or decisions that cannot occur simultaneously; selecting one option precludes the choice of the other.