When the Present Value Analysis of a Proposed Investment Results

question 29

Multiple Choice

When the present value analysis of a proposed investment results in an indication that the proposal has a rate of return greater than the cost of capital, the investment might not be made because:

• A) the quantitative analysis indicates that it should not be made.
• B) management's assessment of qualitative factors overrides the quantitative analysis.
• C) the timing of the cash flows of the investment will not be as assumed in the present value calculation.
• D)post-audits of prior investments have revealed that cash flow estimates were consistently less than actual cash flows realized.

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