Answer (A) is correct . The present value concept may be applied both to dollars-in (inflows) and to dollars-out (outflows). Thus, individual cash inflows and cash outflows or a series thereof (an annuity) may be discounted to time zero (the present). Net present value is the sum of discounted cash inflows minus any discounted cash outflows. Net present value may be either positive or negative.
Answer (B) is incorrect because A present value may be calculated for discounted cash outflows.
Answer (C) is incorrect because A present value may be calculated for discounted cash inflows or a series thereof (an annuity).
Answer (D) is incorrect because A present value may be calculated for discounted cash inflows or outflows.
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