Answer (D) is correct . The NPV is the excess of the present values of the estimated cash inflows over the net cost of the investment. The discount rate used is sometimes the cost of capital or other hurdle rate designated by management. This rate is also called the required rate of return. The accounting rate of return is never used in NPV analysis because it ignores the time value of money; it is computed by dividing the accounting net income by the investment.
Answer (A) is incorrect because Cost of capital is a synonym for the rate used in NPV analysis.
Answer (B) is incorrect because Hurdle rate is a synonym for the rate used in NPV analysis.
Answer (C) is incorrect because Discount rate is a synonym for the rate used in NPV analysis.
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