Which of the Following Is a Disadvantage of the Net

question 115

Multiple Choice

Which of the following is a disadvantage of the Net Present Value rule?

• A) can be misleading if inflows come before outflows
• B) not necessarily consistent with maximizing shareholder wealth
• C) ignores cash flows after the cutoff point
• D) relies on accurate estimate of the discount rate

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Definitions:

Market Securities

Financial instruments that are traded in financial markets, such as stocks, bonds, and derivatives, representing investment vehicles for owners.

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowed funds of a business.

Net Cash Provided

The total amount of cash generated by a company's activities, including operating, investing, and financing activities, during a specific period.

Cash Dividends

The distribution of profits by a corporation to its shareholders in the form of cash.