A Disadvantage of the NPV Method Is That

question 36

Multiple Choice

A disadvantage of the NPV method is that:

• A)the actual return in terms of the percentage of the investment outlay is not revealed
• B)optimum outcomes may not be achieved simply by ranking projects according to their NPVs
• C)the method relies on the use of an appropriate discount factor for the circumstances
• D)all of the options are disadvantages of the NPV method

---

Definitions:

Salvage Value

The predicted leftover value of an asset following the end of its usable period.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Salvage Value

An estimate of the residual value of an asset at the end of its useful life, after it has been fully depreciated.

Book Value

The net value of a company's assets found on its balance sheet, often calculated as total assets minus intangible assets and liabilities.