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Which of the following ignores the Time Value of Money (TVM)? Net Present Value (NPV). Undiscounted...

Which of the following ignores the Time Value of Money (TVM)?
Net Present Value (NPV).
Undiscounted Payback Period.
Discounted Payback Period.
Profitability Index (Benefit-Cost Ratio).

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Answer #1

Answer - Undiscounted Payback Period

NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. Given we need to compute the present value, this uses TVM.

Discounted payback period also computes the present value of cash flows and hence use TVM.

Profitability index is is the ratio of payoff to investment of a proposed project. The payoff requires calculation of PV of the cash in flows and hence uses TVM.

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