Which of the Following Statements Best Describes the NPV

question 33

Multiple Choice

Which of the following statements best describes the NPV?

• A) The NPV method was once the favourite of academics and business executives, but today most authorities regard the MIRR as being the best indicator of a project's profitability.
• B) The NPV method is regarded by most academics as being the best indicator of a project's profitability; hence, most academics recommend that firms use only this one method.
• C) A project's NPV depends on the total amount of cash flows the project produces, but because the cash flows are discounted at the WACC, it does not matter if the cash flows occur early or late in the project's life.
• D) The NPV and IRR methods may give different recommendations regarding which of two mutually exclusive projects should be accepted, but they always give the same recommendation regarding the acceptability of a normal, independent project.

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Definitions:

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