Choice "C" is correct. The net present value method assumes that positive cash flows are reinvested at the hurdle rate thereby considering compounding.
Choice "d" is incorrect. The net present value method measures the value of capital investments in dollars and considers the time value of money.
Choice "b" is incorrect. Net present value uses the cash basis not the accrual basis.
Choice "a" is incorrect. The accounting rate of return is a method of capital budgeting evaluation separate and apart from the net present value method.
