On a Purely Theoretical Basis, the NPV Is the Better

question 75

Multiple Choice

On a purely theoretical basis, the NPV is the better approach to capital budgeting due to all the following reasons EXCEPT

• A) that it measures the benefits relative to the amount invested.
• B) for the reasonableness of the reinvestment rate assumption.
• C) that there may be multiple solutions for an IRR computation.
• D) that it maximizes shareholder wealth.

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Definitions:

Goods And Services

The products and activities that satisfy human wants and needs, with goods being tangible objects and services being intangible actions or experiences.

Deflation

The general decline in prices in an economy.

Consumer Price Index

An index that measures the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, indicating the level of inflation or deflation in an economy.

Specific Set

A clearly defined and identified collection of elements or members.