A project manager is selecting a financial metric to evaluate a project's value. The organization wants to know the present value of all future cash flows minus the initial investment.<br/><br/>Which metric should be used?

Answer options:

Return on Investment (ROI)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Benefit-Cost Ratio (BCR)

How to approach this question

Match the definition. 'Present value of future cash flows minus investment' is the exact definition of NPV.

Full Answer

B.Net Present Value (NPV)✓ Correct

Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. It is the standard metric for 'present value of future flows minus investment'.

Common mistakes

Confusing NPV with ROI.

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