A client wants to know how many years it would take before..

the accumulated cash flows from an investment exceed the initial investment, without taking the time value  of money into account. Which of the following financial models should be used?

• Net present value
• Time value of money
• Payback period
• Internal rate of return

Answer: Payback Period

The requirement is to identify the term that describes a method that measures the number of years it takes to recoup an initial investment without considering the time value of money. This answer is correct because the definition describes the payback period.

Which of the following techniques...

Question: Which of the following techniques consistently gives the best answer when evaluating investment projects that are mutually exclusive?

• The payback method
• The internal rate of return
• Net present value
• The accounting rate of return

Answer: Net Present Value

The net present value consistently provides the best solutions even when considering mutually exclusive projects.

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