A financial manager is evaluating two projects and wishes to do a cash flow analysis of each of the projects. Both projects have positive cash inflows starting in year 1 and last for 5 years. The hurdle rate to evaluate these capital projects is expected to fluctuate during the life of the projects. The financial manager has selected the net present value (NPV) method for the evaluation of the two projects. Did the financial manager select the appropriate method?

A. No, the financial manager should have selected the payback method to properly consider the initial investments and time value of money.

B. No, the financial manager should have selected the discounted payback method since it properly considers the time value of money of all cashflows.

C. Yes, the financial manager should have selected the net present value method because it can properly consider the fluctuating cost of capital.

D. No, the financial manager should have selected the internal rate of return method to properly consider the fluctuating cost of capital.

Answer rating: 100% (QA)

Correct answer is C Yes the financial manager should have selected the n... View the full answer