Which of the following methods is used to determine the financial worth of a long-term investment?

Net Present Value (NPV) is a method used to determine the financial worth of a long-term investment by assessing the present value of expected future cash flows. This approach considers the time value of money, recognizing that a dollar earned in the future is worth less than a dollar earned today due to its potential earning capacity. By discounting future cash flows back to their present value and then subtracting the initial investment, NPV provides a clear measure of profitability.

If the NPV is positive, it indicates that the investment is expected to generate more value than it costs, making it a worthwhile endeavor. Conversely, a negative NPV suggests that the investment would decrease value and should be avoided. This ability to quantify the financial return on an investment over time is what makes NPV a crucial tool for decision-making in capital budgeting and long-term investment planning.

Other methods mentioned, while valuable in their own right, do not directly measure the value of an investment in this manner. For example, Market Value Analysis looks at current market prices, ACM Model Analysis generally pertains to cost management rather than investment worth, and Risk Assessment Model focuses on evaluating potential risks rather than financial worth. Therefore, NPV stands out as the most effective method among the options for assessing long