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      Question

      Among various capital budgeting and investment appraisal

      methods, the Net Present Value (NPV) method is often considered superior primarily because it explicitly accounts for which of the following factors?
      A Total sales revenue Correct Answer Incorrect Answer
      B Time value of money and cash flow timing Correct Answer Incorrect Answer
      C Accounting profits without discounting Correct Answer Incorrect Answer
      D Immediate payback of investments Correct Answer Incorrect Answer
      E Profitability as a simple ratio Correct Answer Incorrect Answer

      Solution

      NPV considers the time value of money by discounting future cash flows to their present value. This gives a more accurate measure of a project's profitability compared to methods like payback period or accounting rate of return.

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