There are three attributes for NPV, making NPV is a popular approach to investment decision making.
a) NPV uses cash flows: cash flows from a project can be used for other corporate purpose (e.g., dividend payments, other capital-budgeting projects, or payments of corporate interest). By contrast, earnings are an artificial construct. While earnings are useful to accountants, they should not be used in capital budgeting because they do not represent cash.
b) NPV uses all the cash flows of the project: other approaches ignore cash flows beyond a particular date;
c) NPV discounts the cash flow properly: other approaches may ignore the time value of money when handling cash flows.
