alleryStart learning →A manager wanting to account for discounting should choose which pair of methods?
ANPV and IRR
BPayback and ARR
CPayback and NPV
DARR and IRR
Answer & Solution
Correct answer: A. NPV and IRR
1. Only one family discounts future cash flows.
2. The payback method and the accounting rate of return are non-time value methods.
3. Two commonly used time value of money-based options are discussed.
4. They are the net present value method and the internal rate of return.
5. So a manager wanting discounting chooses NPV and IRR.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 11 'Capital Budgeting Decisions'_
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