Which one of the following statements is correct? A. The number of years required to recover the initial cash investment in a project, is called Pay Back period (PBP) B. The discount rate that equates the present value of the expected Net Cash Flows (CFs) with the Initial Cash Outflow (ICO) is known as internal rate of return C. The present value of the proposal’s net cash flows, less the proposal’s initial cash outflow is known as the Net Present Value (NPV) D. All of these

The correct answer is D. All of these.

Payback period is the number of years required to recover the initial cash investment in a project. It is calculated by dividing the initial investment by the annual net cash flow.

Internal rate of return (IRR) is the discount rate that equates the present value of the expected net cash flows (CFs) with the initial cash outflow (ICO). It is calculated by solving the following equation:

$$\sum_{t=0}^{n} CF_t / (1+r)^t = ICO$$

Net present value (NPV) is the present value of the proposal’s net cash flows, less the proposal’s initial cash outflow. It is calculated by using the following formula:

$$NPV = \sum_{t=0}^{n} CF_t / (1+r)^t – ICO$$

A project is considered to be financially feasible if its NPV is positive, IRR is greater than the required rate of return, and payback period is within an acceptable range.