Which of the Following Statements Comparing the Use of NPV

question 34

Multiple Choice

Which of the following statements comparing the use of NPV with the use of comparables to value a firm is true?

• A)The use of NPV is always a better method than the use of comparables to determine a firm's value, and comparables should be used only as a last resort.
• B)The use of comparables to value a firm is always a better method because it is both easier and is less subject to estimation error.
• C)Comparables, like NPV, can be used to estimate a true net present value.
• D)The assumptions that must be made when using comparables are much less stringent than the assumptions that must be made when conducting an NPV analysis.

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Definitions:

Goodwill

The favor or positive regard one has towards another, often reflected in generous gestures or compassionate actions.

Organization

A structured arrangement of people and resources designed to achieve a specific purpose or set of goals.

Secondary Purpose

An additional aim or intent beyond the primary goal, often adding value or context.

Negative Messages

Communications that convey unfavorable news, rejections, or feedback, often requiring careful wording to minimize impact.