Of the commonly-employed methods for evaluating capital projects, which of the following offers the most useful, reliable, and germane results for the financial analyst?
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A. B. C. D.C
In analyzing capital projects, particular weight should be given to Net Present Value (NPV) calculations, as this method is viewed as the most reliable and realistic of the four major capital budgeting analysis methods. Net Present Value calculations are superior to Internal Rate of Return calculations in that NPV works regardless of the size or timing of cash flows, and has a more flexible incorporation of the appropriate discount rate. Payback period should be viewed as the most inferior of the four methods, asit does not incorporate the "time-value of money" principle into its calculation. The Discounted Payback Period is only a slightly improved version of the basic Payback Period.