While the NPV Approach Offers Many Advantages Over Some Other

question 44

Multiple Choice

While the NPV approach offers many advantages over some other capital budgeting techniques,several cons exist with respect to the approach.Which of the following is (are) cons of the NPV method?

• A) It fails to consider all of a project's relevant cash flows.
• B) It fails to consider the time value of money.
• C) It focuses on net income and not cash flow.
• D) It seems less intuitive to many users than other methods.
• E) all of the above are cons of the NPV method.

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Definitions:

Consequential Damages

Compensation for losses that directly and foreseeably result from the breach of a contract or other wrongful act.

Lost Profits

Damages claimed in a lawsuit representing the profits one would have made but for another party's wrongful act.

Speculative

Involving a high risk of loss but also offering the potential for substantial gains, often based on future expectations rather than current realities.

Insolvent

Being insolvent means lacking the financial ability to pay debts when they are due, which can lead to bankruptcy or other legal financial proceedings.