Without using formulas, provide a definition of net present value (NPV).

Multiple Choice

• A ranking method used to assess projects. PI greater than 1 signify positive NPV projects, while PI less than 1 signify negative NPV projects.

• A project analysis tool that determines the amount of time required for an investment to generate cash flows to recover its initial cost.

• A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.

• A project analysis tool that measures the acceptability of a project by determining the length of time required for an investment's discounted cash flows to equal its initial cost.

• A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.