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

---

Definitions:

Pretax Income

The income of a company before tax is deducted.

Contribution Margin Ratio

A financial metric that measures how a product's selling price covers variable costs, expressed as a percentage of sales revenue.

Unit Contribution Margin

Unit contribution margin is the difference between the selling price of a product and its variable costs, indicating how much each unit sold contributes to covering fixed expenses and generating profit.

Sales

The total revenue generated from goods or services sold by a company over a specified period.