The capital budgeting method that recognizes the time value of money by discounting cash flows over the life of the project, using the company's required rate of return as the discount rate is called the:

financing method.

net present value method.

simple rate of return method.

payback method.

net present value method.

Explanation:

The net present value represents the current value of expected future cash inflow from a business or an investment project. The net present value (NPV) is one of the capital budgeting techniques that evaluate the viability of a proposed project. The NPV method is acceptable as it takes into account the time element when evaluating a project by discounting future cash flows with an appropriate discount rate.

Net present value can be described as the quantitative difference between the present value of future cash flows and the current value of inputs. As a rule, if the NPV is positive, the project should be accepted and rejected if NPV is negative.