Which of the Following Is Not an Advantage of Using

question 79

Multiple Choice

Which of the following is not an advantage of using the net present value (NPV) approach to evaluate investments?

• A) NPV is relatively easy to calculate.
• B) NPV calculations can be adjusted for risks.
• C) Unlike internal rate of return, NPV always yield only one answer.
• D) NPV allows the comparison of investments with different sizes of initial investment.

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Definitions:

Cost

The amount of money or resources expended to obtain an asset, service, or achieve a specific outcome.

Annual Net Income

The total profit of a company after subtracting all expenses from revenue for one year.

Net Present Value Method

A financial analysis technique that discounts future cash flows to present value to assess the profitability of an investment or project.

Economic Life

This term refers to the expected period during which an asset remains useful to the owner or is expected to generate economic benefits.