The Chief Financial Officer of Five Star Food Distributors has asked you to evaluate the building of a new warehouse. As an astute student of business you explain that the best way to evaluate the project is to use _____ This common method adds the present value of all of the estimated future cash flows; then, it subtracts the initial costs of the investment to determine whether the proposed project is a good idea.

Respuesta :

The answer is net present value.

It is commonly used in capital budgeting  a projected investment or project to analyze its profitability. A positive net value means that the earning from the project exceeds the anticipated cost while a negative NPV means a result of net loss.

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