Rearrange the steps followed in evaluation an investment proposal using NPV method:
A. Calculate the present value of cash flows
B. Identify an appropriate discount rate
C. Forecasting cash flows
D. Rank the projects as per NPV
E. Computer the net present value
Choose the correct answer from the options given below:

Correct option is C

Net Present Value (NPV) is a financial measure that calculates the present value of future cash flows associated with an investment, taking into account the time value of money. It is used to determine whether an investment is profitable or not by comparing the present value of expected cash inflows and outflows over a specific period
The general steps involved in evaluating an investment proposal using the NPV method:
1. C. Forecasting Cash Flows: The first step is to estimate the future cash inflows and outflows associated with the investment.
2. B. Identify an Appropriate Discount Rate: Determine the discount rate, typically the cost of capital or required rate of return, to account for the time value of money.
3. A. Calculate the Present Value of Cash Flows: Discount the forecasted cash flows to their present value using the identified discount rate.
4. E. Compute the Net Present Value: Subtract the initial investment from the total present value of cash inflows to compute the NPV.
5. D. Rank the Projects as per NPV: Once NPVs are computed for multiple projects, rank them to facilitate decision-making.