Question

Following are undiscounted methods of project evaluation?
A. Ranking by inspection
B. Proceeds per rupee of outlay
C. Payback period
D. Net present worth
E. Internal rate of return

• A. A and B only
• B. D and E only
• C. C, D and E only
• D. A, B and C only

Hint:

Any method with the words "present," "discounted," or "internal rate" uses discounting. Payback period and proceeds per rupee are basic, undiscounted financial metrics.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Project appraisal methods are divided into undiscounted and discounted techniques based on whether they account for the time value of money.

Step 2: Detailed Explanation:
Let us classify the given methods:
- Undiscounted Methods: These do not use discount rates to adjust future cash flows. They are simpler but ignore the time value of money. They include:
- Ranking by inspection (A)
- Proceeds per rupee of outlay (B)
- Payback period (C)
- Discounted Methods: These use a specific discount rate to find the present value of future cash flows. They include:
- Net Present Worth (D)
- Internal Rate of Return (E)
- Benefit-Cost Ratio
Therefore, the undiscounted methods are A, B, and C.

Step 3: Final Answer:
The undiscounted methods are A, B, and C, matching Option (D).