The Disadvantage of the NPV Method for Evaluating EC and IT

question 20

Multiple Choice

The disadvantage of the NPV method for evaluating EC and IT is

• A) the true benefits are difficult to measure.
• B) it is difficult to compare projects of unequal lives or sizes.
• C) it assumes reinvestment at the same rate.
• D) it may be difficult to classify outlays as expenses or investments.

---

Definitions:

Market Anomalies

Patterns or occurrences in financial markets that deviate from the efficient market hypothesis, suggesting that securities markets are not always predictable or efficient.

Risk Premiums

The additional return expected by an investor for tolerating the extra risk compared with a risk-free asset.

Expected Earnings Growth

The projected increase in earnings per share (EPS) over a specific period, often used by investors to gauge company performance.

LaPorta's Study

A series of influential research studies focusing on corporate governance, law, and finance across countries, often emphasizing the role of legal systems in financial development.