Net Present Value (NPV) is calculated as:
ASum of cash inflows − Initial outlay
BIRR × Investment
CAverage return × Investment
DSum of PV of all cash inflows − Initial outlay
Answer & Solution
Correct answer: D. Sum of PV of all cash inflows − Initial outlay
1. NPV = Σ CFt / (1+r)^t − Initial Outlay.
2. r = cost of capital (discount rate).
3. Accept the project if NPV > 0.
_Source: ICAI BoS CA Inter Paper 6A, Ch 7 "Investment Decisions", §7 — NPV_